‘The government has to be careful of the consequences’ – sector reacts to rent cap plan
Housing associations and councils are reacting to news of government plans to set a temporary rent cap for next year.
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The Department for Levelling Up, Housing and Communities (DLUHC) today launched a consultation on introducing a temporary rent cap for social housing for the 2022-23 financial year.
The government’s proposed direction is to allow a five per cent increase, but three per cent and seven per are also options as part of the consultation.
Mark Washer, chief executive of Sovereign, told Social Housing a three per cent rise would have a “detrimental impact”.
He said: “It seems to me that whatever the government does... housing associations will want to make their own decisions based on what they know of tenants and the pressures they are under, and every association will have to balance that with the pressures we are under as organisations in terms of rising prices, so this is a really delicate balance and a difficult one.
“It isn’t a surprise the government is thinking about a cap and I understand where they are coming from, although I am not in favour of a blanket cap.”
Mr Washer added: “I think three per cent would have a really detrimental impact on our ability when you think about what inflation for us is running at. Our cost base for both new supply and revenue expenditure is going up vastly more than three per cent.
“I would really worry if we were looking at anything as low as three per cent coming out of this consultation.
“I think government has to be quite careful of the consequences.”
Paul Fiddaman, chief executive of Karbon Homes, also sounded a warning.
He told Social Housing: “All of the options presented are below the prevailing rate of cost inflation and will require a renewed focus on cost efficiency to enable housing associations to continue to deliver their strategic priorities.
“Even then, it is likely that organisations will find it increasingly challenging to deliver investment in new and existing homes and meet the cost of decarbonisation.”
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Gavin Smart, chief executive of the Chartered Institute of Housing (CIH), said housing associations face a balancing act next year and must have time to prepare for the changes.
He said: “CIH is clear that affordability for tenants and residents is of paramount importance, but we also understand that rents need to be balanced with viability and investment responsibilities.
“We look forward to engaging with our members and with the government on the detail of the consultation. We know that social landlords share these concerns and have already been exploring how best to protect affordability while delivering on their investment commitments.”
In a joint statement, James Jamieson, chair of the Local Government Association, and Kate Henderson, chief executive of the National Housing Federation, also voiced concerns.
“Decisions on the level of rent increases for tenants need to be made by housing providers within the existing government rent policy commitment, ensuring that there is a careful balance between affordability for tenants and investment in the homes that they live in,” they said.
“If the government does take forward a lower cap, then it should provide additional funding for 2023-24 and for future years so that housing providers can continue to safeguard services and meet the country’s future housing needs.”
Geeta Nanda, chair of the G15 and chief executive of Metropolitan Thames Valley, said: “All G15 members recognise the current high rates of inflation and are considering the impact of this on residents and the essential work we do carefully.
“To maintain and improve existing residents’ homes, as well as continuing to build much-needed new affordable homes, significant investment each year is essential. Rental income is critical to supporting this work.”
Labour’s shadow levelling up, housing and communities secretary Lisa Nandy told the BBC the announcement gives tenants clarity, but the implications for landlords should be considered.
She said: “This announcement is welcome clarity that social renters shouldn’t be facing rent rises of 11 per cent or more in just a few months’ time.
“But we urgently need clarity on how the shortfall will be funded because social landlords, including hard-pressed local councils, can’t be expected to take the hit.”
Shadow housing minister Matthew Pennycook welcomed the consultation, but said it is concerning there is no suggestion from the government it is willing to make extra funding available to help housing associations cope with below-inflation rent increases.
He said on Twitter: “As with George Osborne’s four-year, one per cent cut to social rents, below-inflation increases will inevitably see social landlords forced to choose between reducing essential services, cutting spending on repairs and maintenance, delaying retrofit work and building fewer new social homes.
“If a lower cap is introduced, the government must either provide additional funding directly to plug the gap or look to other ways to protect the ability of social landlords to manage, maintain, retrofit and build more social homes as part of a new long-term rent settlement.”
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