CIH submit evidence to the government on social rent policy

With a growing cost of living crisis, housing affordability for social housing residents and tenants is critical. However, housing providers must also ensure there is enough investment in housing quality, development and supply. With this in mind, CIH have made a submission to the government's consultation on social housing rents from April 2023. This is supported by independent analysis which we commissioned from Savills.

A copy of our response is available here. In summary:

• Social housing providers are committed to keeping homes safe and well maintained, improving energy efficiency to lower bills, and building much needed new social homes. Providers have been working hard to support tenants and residents struggling with the cost of living and have put extensive help in place for this winter (as highlighted in our cost of living briefing series). However, without government intervention on welfare reform an increasing number of people face hardship. Even before the recent spike in inflation 68% of social housing residents were worried ‘all or most of the time’ about meeting normal monthly living expenses (Resident Voice Index).
• Whilst recognising the sovereignty of boards and councils to be best placed to make informed and localised decisions, we understand government’s wish to intervene in rent setting next year given cost of living pressures. In the absence of intervention, we would expect most social housing providers to increase rents by significantly less than CPI+1%, alongside targeted support for those most in need. Rent increases below CPI will however mean reduced investment without additional government support, which will impact tenants and residents.
• Should the government choose to apply a cap, our analysis shows that based on the current economic outlook:
  • 3% would lead to a projected net loss of resources for LAs of c7-9% of all operating costs (management, maintenance and major repairs) and over 10% of operating expenditure excluding major repairs. For HAs it would equate to c9% operating expenditure or loss of interest cover of up to 30bps.
  • 5% would lead to a reduction of c5-7% in operating costs and c7-9% of operating expenditure (excluding major repairs) for LAs. For HAs it would equate to c7% operating expenditure or loss of interest cover of up to 15-20bps.
  • 7% would equate to a cut for LAs of c3-5% of all operating costs and c5-7% of operating expenditure (excluding major repairs). For HAs, a c3-5% cut in operating expenditure or loss of interest cover of up to 5-10bps. Even at the highest cap providers would have to take difficult decisions about what to prioritise and how to make savings, but this would be more manageable. Our analysis suggests it would allow social housing providers to adapt increases to their context and target support for residents facing affordability challenges.
• Under any cap scenario essential investment in social homes is at risk. To maintain investment in services and homes for residents, while keeping rents affordable next year, the government should:
  • provide grant to support investment in homes and services for residents, to at least the level of the benefit savings resulting from any cap
  • commit to reintroducing a ‘catch up’ mechanism so that rents can gradually return to their real terms level once inflation has fallen back, preserving long term investment for residents and confidence for lenders.
• Should government choose to intervene, any cap should be for no more than one year given the level of economic uncertainty. Supported housing should be exempt, reflecting its vulnerable financial position and viability risks.
• The impact assessment which accompanies the rents consultation underestimates the cost to the sector so we call on the government to publish a full assessment of economic impacts, including the loss of new development, impact on building safety works, decarbonisation and repairs and maintenance programmes before making a final decision on next steps.
• Whilst we agree with the imposition of a rent cap in these unique circumstances, it is important to recognise that this is the second time in seven years that a rent settlement has been broken and this does much to undermine the critical partnership between government and the sector, and the investor confidence that is crucial to ensuring a viable, sustainable social housing sector. We welcome the commitment to shortly consult on a post 2025 rent settlement; the detail of which will be essential in shoring up investor confidence and guarding against future fiscal shocks, thus delivering affordable rents for residents and securing future investment in homes and services.

Responding to the report Gavin Smart, Chartered Institute of Housing (CIH) chief executive, said: 

“CIH is clear that affordability for social housing tenants and residents is of utmost importance, but rents also need to be balanced with the need for ongoing investment in housing quality, development, and supply to ensure that tenants and residents continue to see the quality of homes and services that they have every right to expect

We know that social landlords share these concerns and have been working hard to protect affordability and support those most in need, while delivering on investment commitments. With that in mind, we believe that a 7% cap (for one year and with an exemption for supported housing) would be more appropriate, recognising that many social landlords will in practice opt for a lower increase. This must be supported by benefits uprating at September CPI and reinvestment of any savings generated to the Exchequer.

As government considers consultation responses, we would urge it to consider the wider policy landscape – the need for welfare reform, decarbonisation of the residential sector, affordable housing supply and homelessness prevention – as well as lessons learnt from the previous rent freeze.

Any decision to cap rents will have long term impacts so we welcome the government’s commitment to consult separately on social rent policy from 2025 and look forward to further details so that both tenants and providers can have confidence that our much-needed social housing is safeguarded.”