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Kate Henderson
Kate Henderson is Chief Executive of the National Housing Federation (NHF), the voice of housing associations in England.
...moreIf housing associations limit rent increases this year, they will have to compromise on what to fund
Kate Henderson sets out the difficult decision facing social landlords, and what the effects are if they don’t pass on the full increase they’re allowed under rules that set rents for affordable housing
Coming to a decision on the rent increase must involve genuine and constructive engagement between leaders, tenants and government.
Troubling forecasts paint a bleak picture of the months ahead and a long-lasting recession now seems unavoidable.
Housing associations are increasingly worried about the impact of the cost-of-living crisis on tenants. They are also worried about how they will continue to deliver critical services and work to improve existing homes and build new ones when costs are spiralling in every part of the economy.
Throughout the pandemic, housing associations put in place support and hardship funds for tenants who were struggling. The commitments the sector made on evictions at the start of the pandemic remain in place. But every chief executive I have spoken to has been asking themselves what more we can do and how we can redouble our efforts to ensure tenants can manage this crisis.
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Data we commissioned from the Centre for Economics and Business Research earlier this month shows that it is 12.3% more expensive to build new homes than it was last year, and material costs for repairs and maintenance have increased by 14%. We are already hearing concerns about the Affordable Homes Programme being derailed by inflation and many other vital areas of work are under immense pressure.
We should also remember that 60% of housing association residents are supported to pay their rent through housing benefit or Universal Credit.
“It is inevitable that, without additional funding, any limit to increases will lead to difficult decisions about what to prioritise and compromises about what to fund”
It is in this context that decisions about next year’s rent increase will be taken.
Cost pressures vary significantly across the sector, with some organisations facing bigger challenges because of the scale of the building safety work they need to carry out, or because they provide supported housing with very narrow margins.
Despite this, every housing association I have spoken to will be doing all it can to balance these cost and affordability pressures by limiting increases wherever possible and putting in place significant additional support for tenants to help mitigate the impact of any increase.
It is inevitable that, without additional funding, any limit to increases will lead to difficult decisions about what to prioritise and compromises about what to fund. Should development work be paused? Should work to make homes more energy efficient be pushed back? How do we maintain our investment programme to improve the quality of existing homes?
For example, we estimate that holding rents 5% below the maximum permitted increase for just one year has a cumulative impact of more than £8bn after 10 years, across all housing associations. If high inflation persists next year and rents are again held down, this effect is magnified. And in the most acute situations, a decision to charge lower rents next year could put critical care and support services at immediate risk.
“As hard as the decision is about what rent increase to apply, we think it is right that it rests with housing association boards in the exercise of their fiduciary duties”
As hard as the decision is about what rent increase to apply, we think it is right that it rests with housing association boards in the exercise of their fiduciary duties.
Of course the government has an interest in this critical issue. We understand that it will want to consider what can be done to give certainty to tenants. We have been engaging with ministers and officials proactively on this for a number of months. We have set out evidence on the impact of inflation, highlighted the particular crisis in supported housing, and demonstrated our sector commitment to affordability.
There are no easy answers. But, over the coming weeks, we will continue with genuine and constructive engagement on these challenges. As conversations carry on with the government over the late summer, I will make sure every part of our sector is represented in this critical debate.
Kate Henderson, chief executive, National Housing Federation
