Social housing tenants in England will face a 7 per cent rise in their rents next year under plans set to be announced by chancellor Jeremy Hunt in Thursday’s Autumn Statement, adding further pressure to their straitened finances.
Rents for the 4mn people in the social housing sector, which are regulated by the government, were set to rise at the consumer price index rate plus 1 per cent for the coming financial year. Since inflation reached 10.1 per cent in September, that would have amounted to an 11.1 per cent increase.
But in an attempt to limit the blow for tenants facing a cost of living crisis, the government launched a consultation in August into the precise level for a much tighter rent cap.
Greg Clark, who briefly served as housing secretary this summer, proposed capping rent rises at 3, 5 or 7 per cent. Hunt is understood to have chosen the latter, according to people familiar with Autumn Statement planning.
About 17 per cent of England’s households rent their homes from councils or housing associations, according to official data, typically paying less than tenants in the private sector.
Landlords had warned the government that setting the cap at 3 per cent would give tenants better protection but also prompt severe financial constraints for the sector, inhibiting housing associations and councils from building new properties.
Gavin Smart, head of the Chartered Institute of Housing, a professional body, said he would support an increase of 7 per cent.
“This is a really difficult balancing act,” he said. “We know that this will not be easy for tenants given the impact it will have on affordability. But without sufficient income, landlords will not be able to maintain the homes and services that tenants have every right to expect.”
Many tenants in the sector receive full housing benefit from the state, meaning taxpayers will pick up the cost of the rise in their rents.
However, roughly 30 per cent of social tenants pay the full rents, and will be hit by the increase in full, because they are not eligible for housing benefits.
Likewise many families that are already close to the government’s “benefit cap”, a limit on the total amount of benefit a person can receive, could find themselves having to pay any excess above that threshold.
Polly Neate, chief executive of the charity Shelter, said a 7 per cent rise would “have a disastrous impact on thousands of social tenants” and was “too high”.
“With every other bill rocketing, we will see families falling into arrears. If you can’t afford social rents, which are meant to be the most affordable, homelessness will be the only option left for some.”
The National Housing Federation, which represents housing associations — not-for-profit organisations that control huge swaths of social housing — had warned against a lower cap.
It said opting for 3 per cent for just one year would force members to reduce development activity, given that rents underpin borrowing needed to develop new homes. That could have a “serious knock-on effect” on the wider construction sector at a time when private developers are already retrenching, it warned.
Geeta Nanda, chair of the G15 group of housing associations and chief executive of Metropolitan Thames Valley Housing (MTVH), said protecting tenants while enabling investment into social housing was “one of the biggest challenges I have seen in more than 30 years of working in housing”.
“Setting rent levels for next year means looking carefully at both the challenges people are facing, and the pressing need to continue investing in existing homes and building much needed new affordable homes,” she added.
The Treasury declined to comment.