Consultation launches on future rent settlement

However, the Local Government Association (LGA) recently warned that even a 10-year settlement would still leave councils with an income shortfall of £7bn. 

The government sets the rent policy, including annual increases, for social landlords in England. 

According to the consultation document, it “considered structural changes” that could improve the stability of rent policy, such as a body independent of the government taking the decisions. 

But it said: “Given the very significant policy and fiscal impacts of these decisions, we do not believe it would be tenable for this role to be performed by an unelected body.”

Since April 2020, following a government-imposed four-year 1% cut to social rent, providers have been permitted to increase rents by up to CPI+1% per year. 

The policy was temporarily suspended in 2023-24 and replaced by a 7% limit on annual rent increases following a surge in inflation.

According to the document, the “government recognises the need to provide a stable social housing rent policy, following a series of sudden and unanticipated changes made by the previous government since 2015 to the multi-year rent settlements it had promised”. 

“This is necessary if registered providers, lenders and investors are to have sufficient confidence to commit the level of investment that is now needed in both new and existing social homes,” it said. 

The consultation is also seeking views on alternative lengths of settlement, including a longer seven or 10-year rent settlement, or a ‘rolling’ five-year settlement. 

Under a ‘rolling’ five-year settlement, the government would set an initial rent settlement for the period 2026-31. 

“We would then extend that settlement by a year each subsequent year (so in 2026-27, we would set a policy for 2031-32; in 2027-28, we would set a policy for 2032-33 etc).

“This could provide stability insofar as registered providers and investors would always know what to expect for at least the next five years, which could be helpful for planning investment in new and existing homes,” it said. 

According to the consultation document: “The government has committed to the biggest increase in social and affordable housebuilding in a generation. 

“This is essential if we are to tackle what is the most acute housing crisis in living memory.

“The lack of social and affordable housing has contributed to record levels of homelessness, with over 150,000 children living in temporary accommodation. 

“It has resulted in too many households on low incomes in private rented housing that does not meet their needs and paying rents that they cannot afford. Private renters in the lowest income quintile now spend over half of their income on rent. 

“Increasing overall housing supply will help to improve the affordability of housing, and our commitment to deliver 1.5 million homes this parliament is an important part of our mission to kickstart economic growth. 

“However, we cannot achieve this volume of housebuilding – nor deliver the types of homes the country needs – without a significant increase in social and affordable housing.”

The proposed rent policy would remain in place for at least five years to 31 March 2031.

“It is the government’s intention to set a further five-year settlement for the period beyond this,” the document said. 

Once the policy is agreed, the government will issue the new direction to the regulator, which will then consult on the changes. 

The document also confirmed a timeframe for consultation on a new Decent Homes Standard: early 2025. 

The standard has not been updated for 18 years. 

“This will aim to ensure that safe, secure housing is the standard tenants can expect in both social and private rented properties,” it said. 

The rent consultation closes on 23 December 2024.