A cap on social housing rent – What is the proposal?
23 September 2022
Birketts’ Georgia Harris and Jonathan Hulley look at a Government consultation proposing a cap on social housing rent.
The Department for Levelling up, Housing and Communities published a government consultation on 31 August 2022 proposing a cap on social housing rent increases, to provide support to lower income households during the current cost of living crisis.
The consultation outlines a new ceiling on how much rents can be increased between 1 April 2023 and 31 March 2024.
What does the proposal entail?
The current draft Direction on the Rent Standard (2023) outlines that
‘any increase to the weekly rent of an existing tenant shall be limited to no more than 5%. This means that:
(a) a registered provider may not increase the weekly rent of an existing tenant by more than:
i. CPI + 1%; or
whichever is the lower.
(b) if the tenant’s rent exceeds the rent flexibility level, a registered provider may not increase the weekly rent of an existing tenant by more than:
i. CPI; or
whichever is the lower.’
This will have the effect of limiting the increase in rent that registered providers can impose on existing tenants, to the lower of either 5% or the CPI + 1%, for the period between 1 April 2023 to 31 March 2024. Although it is proposed that further consultations could extend this initial period.
When does the consultation end?
The consultation is due to end on the 12 October 2022 and be implemented practically on the 1 April 2023.
The financial implications
The consultation provided an Impact assessment of four potential policy options; Do Nothing, 3% ceiling, 5% ceiling and 7% ceiling. The outcome of this is as follows.
- Under the current Directions, landlords would have been entitled to increase their social housing rents to 11.1%.
- Registered providers would receive £9.9bn less between 2023-2028 than they would have under the current Direction – this is divided between private providers (£6.5bn) and local authorities (£3.4bn).
- Registered providers would receive £7.4bn less between 2023-2028 than they would have under the current Direction – this is divided between private providers (£4.9bn) and local authorities (£2.5bn).
- Registered providers would receive £4.9bn less between 2023-2028 than they would have under the current Direction – this is divided between private providers (£3.2bn) and local authorities (£1.7bn).
Based on this Impact assessment, the favoured option appears to be imposing a 5% rent increase ceiling. It has been suggested that this protects tenants from significant increases, whilst ensuring that the Registered Providers and Local Authorities still have sufficient turnover to invest back, as well as to front the increases in costs that they too will face as a result of the cost of living crisis.
What happens next?
Following the consultation, any amendments to the Rent Standard will need to be implemented by way of a direction from the Secretary of State to the Regulator of Social Housing, in accordance with section 197 of the Housing and Regeneration Act 2008. This would then be enforceable from 1 April 2023.
It is also stated that the Government is committed to reviewing the social housing renting policy beyond 2025.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at September 2022.