Social Housing and Rent Setting

What are social rents?

Social rents are set using a government formula. This creates a ‘formula rent’ for each home, which is calculated based on the relative value of the property, its size, and comparative local income levels. Formula rent is also subject to rent caps – a maximum rent payable for a property – which vary according to the size of the property.

 

Setting social rents

Over the past decade, we have seen various changes to how registered providers of social housing are able to set rent across their housing stock.

On 8^th August 2022, the House of Commons Library published a useful research briefing note which explains all policy developments in relation to setting social housing rent in England since 2002. The briefing note is must-read for anyone working in this area and can be found here.

On 4^th October 2017, the Department for Levelling Up, Housing and Communities (DCLG) announced “increases to social housing rents will be limited to the Consumer Price Index plus 1% for five years from 2020”. This marked a return to the rent setting approach which was to apply for ten years from 2015 before being replaced with rent reductions from April 2016.

It has been suggested that most social housing tenants faced a rent increase of 4.1% in April 2022. This is likely to be “the largest rise for a decade”, according to the Resolution Foundation’s Housing Outlook for Q4 2021.

With the current economic climate in England, it means social landlords will face difficult decisions when setting rent increases for 2023/24. Commentators refer to landlords having to carry out a balancing exercise between affordability for tenants and investment.

While social landlords will need to carry out this balancing exercise, it is also vital that any rent setting is lawful.  In the event that it’s not, the rent may not be lawfully due, and it could lead to complaints and/or reports to the Regulator for Social Housing, as well as costly civil litigation.

When setting rent, social landlords must not only comply with the Rent Standard, but also the expressed terms within the tenancy agreement and any applicable statue.