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We need to talk about rents Matthew Warburton - 15/03/2013

talk_rents_300A few weeks ago I argued that it was time to think again about rents policy in council housing. CIH agrees. Together with London & Quadrant Housing Association it has published 'We need to talk about rents', which calls on the government to undertake a formal, public review of rents policy after 2015 in social housing.

Their report puts forward three main grounds for a review: accumulating changes which undermine the coherence of the existing framework, the absence of any formal policy beyond 2015 and the challenges posed by welfare reform.

The current framework was intended to provide a common basis for rents in council and housing association homes that would support adequate investment and reflect perceived property values while remaining affordable.

Council rents would rise ahead of inflation to converge with housing association rents over ten years, subject to a maximum annual increase for any tenant. Although convergence with HA target rents is not complete, the goalposts have been moved, as new RP provision is now subject to higher, affordable rents.

And with Pay to Stay, the government has opened up the possibility of future rents being income-linked - a possibility not considered in the design of the current framework.

Welfare reform challenges a second assumption underpinning the current framework - that lowest-income tenants could always expect the rents set by social landlords to be met in full by Housing Benefit. Since the current rent and investment settlement for social housing is due to come to an end in 2015, it is time, the report argues, to look at the future.

CIH and L&Q review 7 options for future rent-setting. They include options that continue to ignore tenants' incomes, but aim to bring rents across the board back to target levels, or raise them closer to market levels. They also include various options which link individual rents to tenants' incomes.

These are all options that should be considered, and it is to be hoped that the government will respond to the report's demand and provide the opportunity for them to be fully reviewed through a public consultation. But I would also argue that options under consideration ought to be widened still further to address two issues that the CIH report does not discuss.

The first is the assumption that there ought to be a national rent policy that applies to all social landlords. The closest the report gets to considering the possibility that different landlords might operate different policies is an option that would give landlords flexibility to set minimum and maximum rent thresholds depending on the circumstances of current and prospective tenants.

But there are good localist arguments for allowing councils, at least, more leeway to determine local rents policies, particularly in the context of self-financing. This might mean abandoning convergence, but this was only ever one policy objective among several.

The second concerns the impact on benefit spending. The CIH report is, I think, too ready to accept that it is a disadvantage if an option to add to benefit spending. But the impact of higher rents on DWP expenditure is only half the story. The other half is the use to which the rent income is put.

If higher rents support higher investment and in doing so substitute for HCA grant, there is a compensating saving to offset the increase in benefit spending, which needs to be factored into the evaluation.

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