Industry figures welcome plan to set 7% limit rather than 5%
Jeremy Hunt has confirmed the government will limit social housing rent increases next year to 7% and not 5% as it previously suggested.
The chancellor, delivering the autumn statement earlier today, said the measure would “support people most exposed to high inflation”. Without intervention, rents could have been put up by up to 11.8% under the existing inflation-linked limit.
Government had previously said 5% would be its preferred option but has now confirmed a higher limit of 7%.
According to a government impact assessment in August, a 7% limit would reduce social landlords’ rental income by £4.9bn over five years, compared to the £7.4bn it would have been under a 5% limit.
Sector bodies welcomed the decision to set the limit at 7% rather than 5%. Kate Henderson, chief executive of the National Housing Federation (NHF) said: “Housing associations are deeply aware of the financial pressures facing their residents.
“The NHF supports the government’s decision to cap social rent increases at 7% in 2023/24. This is rightly well below CPI+1%, the standard formula for rent setting for social housing, while ensuring housing providers can continue to deliver their core services for residents now and into the future.”
The NHF is calling for an exemption from the cap for supported housing providers, due to the higher cost of providing care and support. It also revealed its housing association members have also pledged to voluntarily cap rent rises for shared owners - not covered by the measure announced today- at 7%.
Richard Petty, head of affordable housing at JLL, said the choice of a 7% limit, rather than 5%, shows the government has “struck the right balance” between reducing cost for tenants and adversely hitting the value of social housing properties which are borrowed against to fund development.
He said: “Our modelling shows that 7% should mean increases in Existing Use Value Social Housing valuations in all areas of England in 2023.
“Avoiding significant falls in valuations is vital to underpin secured lending, for the confidence of investors, and for the viability of building more affordable homes.”
More on the Autumn statement
This was echoed by Paul Breen, managing director of Living Space, who said: “There was a fine balance to be struck here to not only shield tenants from the forecasted 11% hike, but to not cut providers’ income streams so drastically that new development would grind to a halt. I believe the chancellor has largely got this balance right to ensure much-needed investments in new, affordable homes continue next year.”
Geeta Nanda, chair of the G15 group, which has previously warned that a rent cap would “significantly reduce development”, welcomed the certainty the announcement brings.
She said: “Confirmation from the government of the 7% ceiling on social rent levels for next year will allow organisations to carefully consider rent setting decisions in the coming months.”
Gavin Smart, chief executive of the Chartered Institute of Housing, said: ”This is a really difficult balancing act. We know that this will not be easy for tenants given the impact it will have on affordability. But without sufficient income, landlords will not be able to maintain the homes and services that tenants have every right to expect.”