Social Rent –7% restriction on rent increases for social housing tenancies in 2023 Here at Support Solutions UK, we like to keep our followers and clients up to date with latest industry news. Our December briefing takes a look at Social Rent and the Regulator's recent decision to apply a 7% restriction on rent increases for social housing tenancies in 2023. Importantly supported housing is exempt from the 7% rent increase and can still apply CPI + 1%, which is 11.1% in total. What is Social Rent and how does it work? Around four million families live in the social rented sector. This is almost one-fifth of households in England. Social housing is provided by either housing associations (not-for-profit organisations that own, let, and manage rented housing) or the local council. As a social tenant, you rent your home from the housing association or council, who act as the landlord. Social housing aims to be more affordable than private renting and provide a more secure, long-term tenancy. Social homes are the only type of housing where rents are linked to local incomes, making these the most affordable homes in most areas across the country. Rents for social homes are significantly lower than private rents. Rent increases are also limited by the government, which means homes should stay affordable long-term so people aren’t priced out of their communities by rising rents. Social housing should be there for anyone who needs it. At present, the law states who is entitled to social housing and should get preference on the waiting list. But councils have lots of flexibility on who qualifies locally and social landlords can refuse to let to people if they so choose. People in social housing usually have secure tenancies, giving them greater protection from eviction and enhanced rights compared to those renting privately. They provide the foundation people need to get on in life, meaning families can put down roots, plan for the future and make their house a home. How is Social Rent set? In 2019, the government set a rent policy for social housing that would permit rents to increase by up to CPI plus 1 percentage point (‘CPI+1%’) per annum, and made clear its intention to leave this policy in place until 2025. We are however living through exceptional times and when the current rent policy was set in 2019, inflation was forecast to be around 2% in 2022 and 2023. In July 2022, CPI was 10.1%. If CPI remained at or above this level in September, this would permit social housing rent increases from 1 April 2023 to 31 March 2024 of 11.1% or more. This is much higher than expected rate of inflation and is already placing considerable pressure on many households, including those living in social housing. Registered Providers of social housing (‘Registered Providers’) were obviously concerned about these pressures on their residents and came together on how the sector should respond. In the face of these exceptional challenges, the government thought that there was a strong case for making a temporary amendment to the CPI+1% policy for 2023/24 in order to provide a backstop of protection for social housing tenants from significant nominal-terms rent increases. The government decided to consult on a new Direction from the Secretary of State to the Regulator of Social Housing (‘the Regulator’) on social housing rents. This Direction would operate alongside the Direction on the Rent Standard 2019 issued on 26 February 2019 (‘the 2019 Direction’). The intention of this new Direction would require the Regulator to amend its Rent Standard so that the current CPI+1% limit on annual rent increases would be subject to a ceiling from 1 April 2023 to 31 March 2024. Registered Provider is allowed to implement. Registered Providers would be permitted to increase rents by 5% or CPI+1%, whichever is the lower. However, within this consultation, we are seeking views on 3%, 5% and 7% as ceiling options, and we are also 7% Social Rent Cap 2023/24 The Department for Levelling Up, Housing and Communities (DLUHC) had floated that social rent increases could be capped as low as 3%, however, setting the rent cap at 7% will come as a huge relief to registered providers and prevents a potentially apocalyptic scenario for some.
Introduction
The National Statement of Expectations for Supported Housing (NSE) was finally published on 20 October 2020, five years after the 2015 Comprehensive Spending Review suggested regulatory and oversight changes were needed, although in 2018 the government announced that housing costs for supported housing would continue to be funded by Housing Benefit.
The NSE has been developed in collaboration between the Ministry of Housing, Communities and Local Government (MHCLG) and the Department for Work and Pensions (DWP) with input from local councils and the supported housing sector.
We are confident you will have read it and understand the content; what good supported living looks like, ensuring the accommodation is safe and of good quality, collaborative working to ensure local demand is met and that providers offer value for money. The latter is the focus of our attention here as we feel that this is a potential risk to the sector.
The guidance states that “Supported housing accommodates some of the most vulnerable people in our society; it is, therefore, essential that it is safe, of good quality, meets residents’ needs and fits with the local community. It must also provide value for money for the resident, commissioner, and taxpayer.
The quality ultimately determines outcomes – higher quality means individuals are more likely to experience better outcomes, whether that means successfully living independently, navigating and staying out of crisis or managing their health effectively. This not only results in a better quality of life for residents but can also support more effective use of resources elsewhere for public services and local councils”.
Working collaboratively is crucial. We would encourage providers to engage with their local council to demonstrate the safety, quality and value of their service.
Risks
While the guidance is suggestive of better outcomes for residents being afforded high quality and safe accommodation it also encourages local authorities to ensure that costs are reasonable, transparent, comparable and represent good value for money. This, superficially, is understandable, and we absolutely agree that supported housing should be value for money, however, it should be value rather than cost that is examined when applying this approach. Our fear is that local authorities may feel obliged to place downward pressure on management, maintenance and service costs to levels which compromise the long-term sustainability of much required supported housing services.
It seems that controlling the enhanced housing management costs is particularly highlighted and we would agree that it is important that care should be taken in this regard. Again, though, we fear that restrictions may be placed on genuine providers who are generating genuine value to the tenants and government.
Although not directly related to the NSE you should also be aware that the Department of Work and Pensions (DWP) Housing Benefit circular (A10/2020), was updated and issued on 10 February 2021. The purpose of the guidance was to inform that the DWP was aware that some local authorities were not referring some rents in supported housing to the Rent Officer (RO) because they deemed them to be reasonable. Staff were remined that where the landlord is not a registered provider of social housing then the rent should be referred to the RO, irrespective of whether they deemed it to be reasonable. This indicates that there may be some local authroities that have not been doing this, and those that have not are likely to experience some subsidy loss thus applying pressure on their own finances.
Coupled with local authorities being advised to take steps to ensure that the supported living accommodation is providing value for money, as part of the NSE, it seems that there is a real risk of rent and service chages coming under increased scrutiny.
Mitigation
We have 20 years of experience in helping providers of supported housing to review their charges and service delivery to give them and local authorities assurances that charges are both transparent and robust.
Considering the potential additional scrutiny that the NSE leans towards we would suggest that this is an ideal time, if not vital, for organisations to review service delivery models and existing rent and service charges. By doing so risks can be mitigated.
By way of example, one of the latest cases we have worked on highlighted that some charges needed to be optimised and the others were, in fact, being overcharged. After our review we were able to advise on how costs and resources could be pooled and how a greater allocation of income could be directed to business support.
The exercise insured that the organisation is in a much better position and prepared for any detailed scrutiny of charges.
For independent and experienced help in reviewing your rent and service charges and service delivery model please email us at info@supportsolutions.co.uk