Government plans to ditch rent convergence policy
The government is planning to cut short its policy of rent restructuring, which was designed to achieve convergence of social housing rents.
In a surprise move that was not announced as part of the rent settlement in last month’s spending review, the Communities and Local Government department has revealed that it is ‘minded not to extend rent convergence beyond 2014/15’.
This means that social landlords will no longer be able to increase rents by an extra £2 under the rental formula to gradually align properties with their target rent and ensure that similar social homes in similar areas charge similar rents.
For landlords that still have many tenants paying below target rents after 2015, the change could limit income and their capacity to build.
Restructuring was introduced in 2002 to align rents in council and housing association properties and was expected to achieve convergence by 2016.
Under the rents settlement announced last month, from 2015 social landlords are to use a new rent setting formula of the consumer price index plus 1 per cent.
This formula is to be fixed for 10 years and replaces the current formula of the retail price index plus 0.5 per cent plus £2.
In a letter sent to housing bodies last week, Graham Duncan, deputy director of affordable housing regulation and investment at the CLG, said: ‘Having considered the issue carefully, we are minded not to extend rent convergence beyond 2014/15 – and the policy costings published by the Office of Budget Responsibility are based on that assumption.
‘We expect most landlords to have achieved rent convergence by 2015. By that point, rent convergence policy will have been in place for almost 15 years – this is a significant period of time for landlords to make full use of the rent flexibilities the government has provided, and most have done so.’
He said associations that believe the change will cause them difficulties should contact the housing regulator.
Mr Duncan added that CLG would set out details on ‘limit rents for local authorities in 2014/15 in due course’.
The letter was sent to the Chartered Institute of Housing, the National Housing Federation, the National Federation of Arm’s-Length Management Organisations, the Local Government Association, and the Association of Retained Council Housing.
The government plans to consult on the changes.
