Preferred rent cap would leave £13.5bn black hole in G15 funds over next 30 years

The member body also carried out forecasts for the same period for a 3% cap and a 7% cap, the other options being considered. The lower cap of 3% would see a reduction of nearly £18bn, while a cap at 7% would see re-investable income reduced by £9.3bn. 

During its consultation on the cap, the government put forward a 5% ceiling as the preference because it would “strike an appropriate balance” between protecting tenants from huge rent hikes and social landlords’ budgets.

The G15 said that it is “deeply concerned” about the cost of living pressures on its residents and that it has tried to mitigate that by increasing support for residents, including providing £5.8m for vital crisis support this year, and helping residents to secure £44m of financial gains last year.

Nevertheless, while it acknowledged that a cap would protect renters from huge hikes, it also outlined how social housing providers’ income will be limited at a time when the cost of providing their services is higher due to inflation. 

The G15 said that landlords have already seen costs for vital materials for repairs and maintenance work increase by as much as 16.8% this year, and the cost of constructing new homes has grown by more than 11%. 

At the same time, energy costs for G15 members are forecast to have increased by 225% for electricity and 573% for gas, on average, between 2021-22 and 2023-24. 

Insurance premiums have also increased sharply over recent years, with one G15 member seeing increases of more than £3m in the past two years, and another seeing increases of over 100% year-on-year. 

While outside of the scope of the government’s consultation, the G15 said it recognises the concern that shared owners will have about the impact of high inflation on the rental element of shared ownership.

A 7% cap on shared ownership rent increases would reduce re-investable rental income for G15 members by £1.15bn over 30 years.

Where possible, the G15 said that its members do not want to apply the maximum increases on rents for shared owners.

To help mitigate the impact of the rent cap, the G15 is calling on the government to ensure that benefit payments are uprated in line with inflation, and to make a specific exemption for supported housing from the proposed rent ceilings.

Other options include the reintroduction of the plus-£2-per-week rent convergence flexibility, which was scrapped by the government in 2015 to enable associations to catch up with foregone rent from setting a sub-CPI+1% rent increase in April and achieve an economically neutral outcome over time.

This is in addition to allowing Recycled Capital Grant Funding to fund major repairs, additional grant funding for the development of affordable homes, and removing VAT on housing association activity.

Geeta Nanda, chair of the G15 and chief executive of Metropolitan Thames Valley, said: “Whilst ensuring the safety of all the homes we provide is our number-one priority, the consequences of low rent ceilings could potentially see planned building safety works slowed down, as well as investment in existing homes having to be delivered over a longer period. 

“Fewer new affordable homes will be built, progress on decarbonisation and retrofitting will be curtailed, and the financial capacity of organisations will be reduced if key ratings and measures are negatively affected.

“It’s vital that these possible impacts are acknowledged by government and shared with residents in the spirit of transparency. If no ceiling was introduced on social rents, it would be extremely unlikely that any organisation would seek to apply the maximum possible increase next year.”

Ms Nanda said that the G15 is committed to maintaining affordability for residents, and that she believes that associations should be allowed to set rents independently as they are best placed to achieve the right balance in the context of residents’ immediate and future needs, and the long-term requirements of associations.