Frequently Asked QuestionsRent & Service Charges

How housing associations set rent

By February 25, 2020 No Comments

Notice of Rent Increase

In February of each year you will receive the usual written notice of the April rent change, but we wanted to give you some more information here about how our rents are set.

The 2020 Rent Standard

Government policy tells Housing Associations how to set their rents. The government’s policy on rents for social housing has been revised. The new rules will apply from 1 April 2020.

The government has set a ‘long-term rent deal’ for both local authority landlords and housing associations. This allows annual rent increases on both social rent and affordable rent properties of up to Consumer Price Index (CPI) plus 1% from April 2020, for at least the next five years*.

This will generally apply to social rents for tenants whose tenancies continue in their current homes.

* Please note where your payments include a separate service charge element this is not affected by the rent standard. Service charges are calculated according to reasonable estimates and actual expenditure and can go up or down

Rent Flexibility Level

The government’s policy recognises that Housing Associations should have some say over the rents they set for individual properties. This allows them to take account of local factors and concerns, in consultation with tenants.

So, the rent standard contains flexibility for Housing Associations to set rents at up to 5% above formula rent (10% for supported housing). If applying rent flexibility, landlords should give clear reasons for doing so, which consider local circumstances and affordability.

From April 2020, Town & Country proposes to apply the 5% flexibility to all new social housing lettings. This will ensure that rents are affordable for our tenants whilst TCH remains a strong, financially viable business (our core services such as repairs and housing management are paid for by our rental income – you can see more details about how your rent is spent in the Annual Report to Tenants).

TCH reasons for using the 5% flexibility are:

  • We have reviewed how affordable our properties are and have concluded that charging social rent at target rent plus 5% will generally allow us to keep rents lower in most areas than if we charged ‘affordable rent’ on new lettings. Where this is not the case (because areas have comparatively low rents and house prices) like in some parts of East Kent, affordable rent may be charged if this is the lowest rent option.
  • We have an ambitious development programme supported by a solid business plan, with targets to increase the number of new properties started on site to 800 homes a year by 2021-22. We want to do this to help meet the urgent demand for good quality housing that people can afford; helping us to fulfil our social purpose. TCH’s ability to develop 800 new homes each year depends on several things;  charging social rent at 105% of target rent, which helps demonstrate our financial viability to lenders, is a key factor.

If you have any questions or comments, please contact us at rent2020@tch.org.uk

Rent Policy Background

Social Rents

Since 2001, ‘social rents’ (This means most traditional housing association rental properties.) have been set based on a formula set by government. There is a ‘formula rent’ for each property, which is calculated based on the value of the property, local income levels, and the size of the property.

The Rent Cap

A ‘rent cap’ applies to formula rents. The rent cap is the maximum that can be charged and depends on the size of the property (based on number of bedrooms). Where the formula rent would be higher than the rent cap for a property, the rent cap rate must be used instead.

Affordable Rent

In 2011, the government introduced ‘affordable rent’ which allows some housing association rents (inclusive of service charges) to be set at up to 80% of local market rent. The higher rent levels were introduced to help Housing Association develop more properties for those in housing need, as direct government grant funding for this is limited.

Full Market Rent

From April 2015, the government made it possible for social landlords to charge a full market rent where a social tenant household has an annual income of at least £60,000. TCH took the decision not to use this policy as it would not be possible to apply it fairly because housing associations cannot require tenants to provide us with changes to their income details, once they’ve moved into a property.

Reducing Social Rents

For the last four years government policy has reduced social rent and affordable rent costs for tenants. From April 2016, the Welfare Reform and Work Act required social landlords to reduce their rents by 1% each year for four years (the Social rent reduction). This requirement ends in April 2020