The government has published their impact assessment of the
measures included in the Welfare Reform and Work Bill to reduce
social housing rents by one percent per year over the next four
The Impact Assessment states that the policy
objective is to tackle the deficit and rebalance the welfare state
to achieve an in-year housing benefit saving of £1.995bn.
It seems to focus almost exclusively on the impact on housing
associations but contains no separate assessment of the impact on
stock retained councils.
The Housing Minister states that the savings are set alongside
the rapid increase in housing association surpluses in recent years
and states that surpluses in the housing association sector have
continued to rise to a total of £2.4billion for 2014 - an increase
of 22% compared to 2013.
However the government's Impact Assessment fails to acknowledge
that local authority stock retained councils only entered into the
self-financing regime in 2012 and HRA Business Plans are not
generating the same level of surpluses that the housing association
The Impact Assessment states that Ministers considered
- Continue the current policy of an annual rent increase limit of
CPI +1% for ten years
- Reduce social housing rents annually by one percent for four
years from April 2016
- Reduce amounts of housing benefit paid to cover rent in the
Impact Assessment fails to recognise that the position of
housing associations and stock retained councils is fundamentally
different. While many housing associations generate significant
surpluses, local authorities entered into a self-financing
arrangement less than three years ago and significant numbers of
stock retaining councils have not yet met the "rent convergence"
targets and council house rents remain on average lower than
housing association rents.
It would appear Ministers did not consider the option of
applying a different approach to rent setting in the stock retained
sector by for example considering the option of applying a
differential approach to the stock retained sector (where rents and
surpluses are not as high as in the housing association sector) and
for example applying a rent freeze (as opposed to a one percent
rent decrease) to council housing.
There is some potential relief for social landlords in that the
Impact Assessment states there will be a number of exceptions from
the rent reduction requirements including low cost home ownership
and shared ownership. However, ironically most of these types of
schemes will apply to the housing association sector rather than
the stock retained sector.
The Impact Assessment recognises that the reductions will have
an impact on housing association balances but contends that the
strong balance sheets mean that they are well placed to manage
these reductions and that they estimate that the new "pay to stay"
will create additional rental income of "hundreds of millions of
pounds per year" to support their Business Plans.
The impact assessment makes no attempt to assess the impact on
council HRA balances nor does it recognise that any additional
income that may accrue to stock retained councils as a result of
the proposed "pay to stay" scheme will be required to be paid by
local councils to the Exchequer and unlike housing associations
will not be available to councils to support their business plans
to invest in services for council tenants, maintaining and
improving council housing or delivering more new council homes.
ARCH believes that because of the different financial positions
of the stock retained sector and the housing association sector
Ministers should have considered a fourth policy option in addition
to the three set out in the Impact Assessment by considering a
differential approach to the stock retained sector and either
maintaining the existing social housing rent guidance issued in May
2014 for council housing or imposing a rent freeze on council house
rents (as opposed to a one percent rent reduction) in line with the
freeze in the Local Housing Allowance.
Read the full Impact Assessment of Social Rent