Monday, September 26, 2022
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Social Rent Freeze | New Economy Foundation

Protecting those most vulnerable to the cost of living crisis from unbearable rent increases

Rising private rents are making the wrong headlines, rising by as much as 20% in place. But the looming social rent pressures have been largely ignored by comparison. By April next year, social landlords will be able to raise rents to the CPI from September 2022, plus 1%. That would raise social rents by potentially 11 per cent – the biggest increase in years – squeezing some of the poorest households as they emerge from a winter of high energy prices.

Thankfully, after months of pressure from activists in the summer, the government announced that there will be a consult Explore potential increases that limit rents to 3%, 5% or 7%. The question now is: should rents go up, or by how much?

Cost of living is not the only consideration. Rent is the main source of income for the social housing sector and used to be allocated by government development programmes. There are two main types of lease terms in the social housing sector: social rent linked to local income or affordable rent up to 80% of market rent.Rent is paid in two ways: State support in the form of housing benefits, where rents are rising faster than wages Currently, will increase; and private disposable income. Therefore, any increase in social housing rents is a cost to affected renters and taxpayers.

In housing associations and local authority homes, roughly 60% of renters receive housing benefits from their rent.This covers almost 85 per cent of rent for housing associations and almost 80 per cent of rent for council-owned houses, costing taxpayers more than £12 billion Year 2021. The remainder of the rent is paid from private household income and, in addition to housing benefit entitlements, is paid by households not receiving housing benefits.

New NEF analysis shows what the total cost of households and housing benefit bill would be in England in April this year under different scenarios of rent hike caps. The calculation assumes that the proportion of social rent covered by housing benefits remains largely unchanged. How incentives change in the welfare system is complex, but with inflation and rents outstripping wages, broad government support will seek to cover these rising costs.

For each rent cap, the cost to households is slightly higher than the cost to taxpayers. Even a 3% cap – the lowest level initially suggested in the government consultation – would have a total cost of around £612m. Of that, £306m will not be included in housing benefits, putting additional financial pressure on families living in social housing. Under the 7% cap, the total cost would rise to around £1.4bn, and just over half (around £715m) would be supported by household income outside of housing benefits, with wages likely not rising with inflation.

Total annual cost to households and taxpayers Rising rents for UK social housing will be caused by cap levels

soaring in energy costs and consumer prices (inflation may reach 15% By 2023), social housing rent increases will intensify significantly 17% British family.

Furthermore, these families are among the poorest and most vulnerable in the country.through the right to buy Residualization of social housing residents. Wealthier households buy homes at a discount, leaving those in the most challenging socioeconomic conditions in the remaining social housing stock.This is illustrated by the disproportionate representation of social housing residents in food bank user data: 2019 was report 57% of housing food bank users live in social housing.

Rising rents could be the pressure for these families to make an impossible choice between putting food on the table, heating their home or building a house over their heads. so, we are asking the government by following the Scottish example and Freeze social rent

The next question, then, is how should this loss of social landlord income be calculated?

In times of crisis, families should not act as ​​​An intermediary for government funding of the social housing sector through housing benefits. This approach leaves families who are not lucky enough to receive state support facing unaffordable housing costs.Instead, the government should provide the social housing sector and councils with direct capital grant For their operation, circumvent the occupants. Such a grant would prevent social landlords and councils from scaling back their operations amid a social rent freeze. Decarbonization, building safety work and developing pipelines must continue.No funding, long-term challenge social housing net loss will be more difficult.

With the social housing sector facing a triple crisis – security, climate change and affordability – financial support has never been more needed. Faced with these challenges, grants must be delivered intelligently while ensuring that operations do not become unviable. There must be a constructive and swift dialogue between social housing providers and the central government.

If the grant equates to the 11% increase in revenue the provider expects, the government will only spend around £2bn. If the grant is matched with rent increases in April 2022, it will only cost £107m.These numbers are the same as £187 billion in cumulative energy support, and £28.9 billion Annual spending on housing-related benefits for private renters and social renters.

Without state support for social landlords, households could see their service charges rise, offsetting the benefits of any rent caps.Unlike rents, service charges are not included in the rent standard, but are governed by broader tenancy legislation which states they must be ​​​reasonable’. In challenging and volatile economic conditions, social landlords who are unable to maintain economic stability may be forced to include their costs in service charges. This would make any rent caps redundant, further tightening household finances and increasing the cost of housing benefits.

One unknown in the government consultation is whether residents of shared-ownership arrangements, whose remainder of their home equity is paid on partial mortgages and rent, will see their rent caps. Ultimately, this is unlikely because, unlike properties that are fully rented and regulated by social housing rent standards, rents in shared ownership are managed by individual leases, most of which rise at the rate of RPI inflation plus up to 2%. result?potential rise in more than 14% Against the broader financial backdrop of rising mortgage costs. Consultations should not ignore these families and acknowledge their instability in this crisis.

Finally, this consultation addresses a broader existential question in social housing: how much rents should rise. Rent affordability is best determined based on household income and associated purchasing power. Social rent is the only truly affordable land tenure, as it is based on local income levels. The current system of linking rents to inflation, which is not directly related to real income growth, slowly erodes the affordability of social rents. E.g, Resolution Foundation It is estimated that if inflation reaches 13%, all real earnings and compensation increases since 2003 will be wiped out. However, despite the deterioration in household purchasing power, social rents will still rise, making tenancy unaffordable.

There must be a wider shift in regulation of the social housing sector to ensure rents reflect how incomes are set and raised, and subsidies to social landlords to reflect their role in the delivery of public services. As part of our campaign for more social housing, our homeWe encourage you to use our tool Protect tenants from unaffordable rent increases.

Freeze Social Rent – Email Your MP

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