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Rent convergence is vital to allow us to boost growth and impact
We must reintroduce rent convergence to boost growth and avoid community investment trade-offs, writes Jo Savage, chief executive of Greatwell Homes and board member of PlaceShapers
Jo Savage is chief executive of Greatwell Homes
At the start of this new year, it’s crucial that we reflect on the government’s recent consultation on the future social housing rent policy. The responses, published just before Christmas, reflect my own board’s discussions as we get ready to notify customers about this year’s 2.7% rent rise.
A decade on from its demise, there’s now a growing campaign to bring rent convergence back. This mechanism allows housing associations to gradually raise rents that are below the earnings-linked formula, so people pay a similar rent for similar properties.
Greatwell Homes strongly supports its reintroduction as part of the proposed rent settlement, to replace lost income and ensure we can continue making vital investment in our communities.
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The National Housing Federation has reported that rent convergence could unlock 90,000 new homes by generating £3.5bn in additional rental income over 10 years. New research by the G15 group of London’s largest landlords revealed this week that reintroducing rent convergence by £3 per week per property would yield £773m over the same period.
For Greatwell, which manages over 5,000 homes, the reintroduction of rent convergence would significantly enhance our capacity to invest in both new and existing homes. Over time, this could unlock an additional 150 new homes in areas where affordability challenges are acute, making a real difference to people’s lives.
“The reintroduction of rent convergence would significantly enhance our capacity to invest in both new and existing homes. Over time, this could unlock an additional 150 new homes in areas where affordability challenges are acute”
If all social rents were set at the formula rent, our rental income would increase by £1.6m per year. Even a modest increase of £3 per week for rents below the formula would generate an additional £566,000 for the 2025-26 financial year.
As a proud PlaceShapers member, we’ve always believed in providing more than just bricks and mortar. Our Live Greatwell corporate strategy commits us to delivering the education, skills, health and other support neighbourhoods need to thrive. So in our PlaceShapers response to the government consultation and the case study we provided, we highlighted the benefits that rent convergence would bring to our communities.
Affordability for residents must be central to any decision to increase rents. However, rent convergence can be implemented gradually, with manageable increases and support for those who need it. For example, in Wellingborough, a £3 per week increase would raise the average social rent to £109.63 per week, still significantly lower than the average private rent of £203.07 per week in North Northamptonshire.
In April 2023, we introduced our customer assistance pot to accompany the inflation-driven 7% increase, which has been well used.
Our board takes rent decisions very seriously but is reassured that this assistance pot will continue to be available as we announce this year’s rent increase. And our customer assembly fully supports this approach. They recognise and believe in the value of our community activities beyond just providing housing.
“Rent convergence can be implemented gradually, with manageable increases and support for those who need it”
Of course, we have to balance our ambitions against financial sustainability, especially given the lower-than-anticipated Consumer Price Index (CPI) figure in September 2024. We’ve already made a tough choice to scale back some ambitions. We’ll now aim to make 450 homes more accessible rather than fully accessible, as we’d hoped. And we’ve extended the deadline for achieving Energy Performance Certificate (EPC) Band C for all our homes from 2028 to 2030.
These decisions, while necessary, will have a negative impact. For example, a lack of more accessible homes that don’t fully meet people’s needs will affect hospital discharge and increase the pressure on social care budgets. And delaying EPC works by two years will only mean higher energy bills for some customers.
By contrast, rent convergence would bring in extra income to accelerate our plans and enhance our community impact. We could develop land-bank sites with more affordable and social homes, rather than cross-subsidising these from sales and shared ownership. This would improve the area’s infrastructure and help people in need move out of poor-quality, unregulated private renting into secure, sustainable and affordable homes.
The five-year CPI plus 1% settlement announced in the Budget is a positive step, but a 10-year deal, protected in law and including rent convergence, would go a long way to providing the certainty and stability housing providers really need. It would allow us to maintain long-term community investment, avoid harmful trade-offs with other priorities and deliver the growth and improvements everyone wants to see more quickly.
For committed placeshaping organisations like Greatwell Homes, rent convergence is not just about increasing income; it’s about creating a sustainable future for social housing, improving affordability and enhancing people’s quality of life. I hope the government will listen and agree.
Jo Savage, chief executive, Greatwell Homes and board member, PlaceShapers
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