Inequalities to social rents have cost London’s largest housing associations more than £2bn, housing association group says

More than half of the social rented homes provided by London’s largest housing associations are at risk of becoming unsustainable to manage due to changes in rent policy, according to new analysis.

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Andy Hulme, chief executive of Hyde

Data collected from the G15 group of associations shows £2bn in rental income which could have been used to improve homes has been lost over the past few years due to the government scrapping its rent convergence policy.

Historically, the level of social housing rent residents pay to councils and housing associations has varied depending on when and where their home was built. To counter this, from 2002, the government allowed cheaper rents to increase by the Retail Prices Index (RPI) + 0.5% and a maximum of an additional £2 per week, every year. But this policy was scrapped in 2015.

The analysis of rents by Hyde for the G15 shows more than half (57%) of social homes managed by London’s largest landlords have now diverged away from the higher ‘formula rent’. This has cost the G15 members alone £211.4m a year, meaning they have an equivalent of £400 less to invest per social rented home per year.

Andy Hulme, chief executive of Hyde Group, said: “The evidence is clear, scrapping rent convergence has sucked resources away from social housing providers being able to invest in customers’ homes.

“This move will mean G15 members alone will have more than £2bn less to invest over a decade, and this is equivalent to losing almost a quarter of the money we invest in each social home every year.”

Hulme added that the losses come at a time landlords are investing record sums to address building safety and damp and mould issues.

He said: “With more than half of homes not meeting the formula rent, in the long-run they become unsustainable for social housing charities to continue providing. We simply have to avoid this happening.”

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The G15 analysis also says the ending of convergence has led to “unfairness and tension” about unequal rents, with some social housing residents “being charged more than 30% less than a fellow resident to live in a home of a very similar standard.”

Fiona Fletcher-Smith, chair of G15 and chief executive of L&Q, said: “Social housing exists to give people an affordable and safe home and helps to reduce the growing income inequality we see in society. Scrapping rent convergence undermines the purpose of social housing because it introduces more inequality into the system”.

The G15 has also calculated that large London housing associations have lost £6.6bn as a result of the government’s 2016-2020 1% annual rent reduction and last year’s 7% rent cap.