Brandon Lewis, Housing Minister, has signalled that social and
affordable rents will return to an inflation-linked formula after
the four year rent reduction period.
Mr. Lewis reaffirmed the policy in front of the Communities and
Local Government Committee on Tuesday 15 December 2015.
Councils and housing associations were told by Chancellor,
George Osborne, at the July Budget that social and affordable
housing rents would be reduced by one per cent per year for four
years from April 2016. Powers to compel councils and housing
associations to reduce rents are included in the Welfare Reform and
Work Bill currently before Parliament.
We estimate that the reduction over the four years will
mean that by 2020/21 stock retained councils will suffer a drop in
forecasted rental income of some £2.4billion and a loss of
£30billion income over the 30 year business plan period. This will
significantly affect the resources available for housing services
and planned investment in building new council housing and
investment in the existing stock.
Justifying the mandatory rent reduction, the Housing Minister
pointed out that the reduction is a 'saving for tenants' and argued
that social housing rents have been increasing 'higher and quicker'
than private sector rents.
However, he said: "There's obviously an agreement that goes
beyond that [period] already and I don't see any reason for that to
change." (Q356 in response to a question from Helen Hayes
The Minister's answer was given in response to a question on the
impact of the rent reduction on housing associations. Stock
retained councils will need to consider what projections of rental
income should be included in their business plans beyond 2020/2021
in light of these comments.
The Minister also signalled that in making payments under clause
62 of the Housing and Planning Bill (to fund extension of the Right
to Buy to housing association tenants) under the formula based
"If a local authority wants to keep ownership of a
particular local authority property, but pay off the required
amount doing something else, whether it is from the General Revenue
Account or selling off a different piece of land, that will be very
much a matter for them" (Q315 in response to a question from Julian
This seems to indicate a high degree of flexibility in where
stock retained councils find the resources to make the required
payments to the government under this clause.
In answer to a question from Helen Hayes MP (Q350) the Minister
also announced that 'pay to stay' will only be mandatory for
council house tenants saying that the scheme "will now be
voluntary for housing associations" but that he "expected
the majority of housing associations will consider operating(a 'pay
Read thefull transcript of the Minister's responses