Government Presses Ahead With Rent Convergence Plan

The government is pressing ahead with plans to scrap the policy of bringing social rents into line a year earlier than initially planned.  ‘Rent convergence’ – the process of gradually increasing social rents until they meet a ‘target rent’ – will end next April, the CLG has confirmed. In a long-awaited response to its consultation on social housing rents, the CLG upheld plans to limit social rent increased to consumer price index + 1 per cent from April 2015. Currently landlords can charge an extra £2 a week in order to reach target levels. Some landlords have warned the move could cost them tens of millions of pounds in lost income.  However the department stated it would widen the circumstances under which housing associations could apply to the HCA for exemptions from the new rent policy. Read more on Inside Housing.

Rent Plan Blows Hole in Council Coffers

Councils are planning inflation-busting rent hikes in an attempt to plug multi-million pound holes in their business plans caused by proposals to change rent-setting rules. Analysis of the business plans of more than 40 English councils reveals that the majority will apply the maximum rent increases allowed in 2014/15. The average increase will be 5.16 per cent. They are doing this to minimise predicted losses of hundreds of millions of pounds over their 30-year business plans as a result of an early end to the government’s policy to align social housing rents. Under government plans, from April 2015 councils will no longer be able to increase rents gradually by £2 until they meet optimum, known as target rent. This means 2014/15 is the last year they can use the formula of the retail price index (3.2 per cent) plus 0.5 per cent, plus up to £2 per week. Instead, for the next 10 years rents will be set using the consumer price index plus1 per cent. Read more on Inside Housing.

Rent Rules Will Slow Housebuilding Rates

The new government formula which dictates social housing rent increases was announced last month and was welcome for providing some stability for housing providers – but the much quieter announcement that rent convergence will be cut short after 2015 is worrying for a country that desperately needs the development of more homes.  Rent convergence – which allows social landlords to increase rents by an extra £2 to slowly align properties with their target rents and help ensure similar properties charge a similar level of rent – has been in place for more than a decade, but in a letter sent to housing providers last week the CLG declared they are "not minded" to extend the policy. Social landlords have responded to this by claiming that this will cost them hundreds of millions of pounds a year and will impede their ability to build new homes, while councils warned the change will affect their ability to repay debt.  Read more on the Guardian website.