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Samantha Grix is a solicitor at Devonshires
Housing providers must respond to the rent cap consultation with evidence
The rent consultation is enormously important and housing associations must respond in the correct way if they want their views taken into account, writes Samantha Grix
The rent consultation is enormously important and housing associations must respond in the correct way if they want their views taken into account, writes Samantha Grix #UKhousingThe social housing rents consultation into a proposed rent cap is one of the most important for the social housing sector since the rent reduction provisions of the Welfare Reform and Work Act 2016. Given the impact of a cap, it is important that all registered providers (RPs) respond to have their voices heard.
While it is understandable that the government would want to protect social housing residents amid the cost of living crisis, the proposed rent cap options of 3%, 5% or 7%, will cost the sector billions of pounds a year.
While designed to help residents, social landlords will acutely feel the pinch of a cap, given that their costs will remain linked to inflation but with a reduced income to pay those costs.
The National Housing Federation warned that the rising cost of repairs and maintenance will mean RPs will have to compromise on what they fund, which will no doubt mean a reduction in new homes and other non-essential initiatives.
The figures on the amount of revenue that this will cost RPs is eye-watering.
The government has said that they would prefer a 5% rent cap to be imposed and that this would see landlords receive £1.3bn less in rent next year compared with if no change was made. A 3% cap would leave a £1.8bn black hole next year, while a 7% cap would leave housing associations £900m short.
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So, what do RPs need to know if they are going to respond? The Regulator of Social Housing (RSH) has encouraged all RPs to respond and, importantly, told them to make their answers evidence-based.
By this, the RSH means give examples of how a 3%, 5% or 7% cap will affect RPs in practice. How will each cap impact the business financially? Give examples of developments that will no longer be pursued as a direct result of a higher cap if introduced.
One of the key sticking points for many RPs with the consultation is that it does not propose to make any exemptions for the rent cap.
“RPs are in an invidious position as most want to be able to carry out their charitable objectives but at the same time have to pay ever increasing costs”
This is a real problem for providers of supported housing which invariably costs more due to the nature of the accommodation and services provided. RPs that provide this type of accommodation should waste no time in responding if they are of the view that an exemption should be provided, as they will need to make out a case as to why this is justified.
Again, evidence is key here, so use specific examples.
The consultation asks the question of whether RPs would prefer the cap to be for one year or extended for two as the latter bring this in line with the end of the rent settlement. There are two schools of thought on this. The first is why would you want a cap for two years when you don’t know what will happen in a year’s time?
The other is that if you have a cap in place for two years, it may at least give you a modicum of certainty and allow you to plan. Consideration should be given to your organisation’s view and explain the rationale for this.
Fundamentally, RPs are in an invidious position as most want to be able to carry out their charitable objectives but at the same time have to pay ever increasing costs. Given the current financial climate, consideration should be given to how the proposed cap levels affect your business plan and what would you do to alleviate hardship of the poorest tenants irrespective of the level of cap imposed.
While RPs are encouraged to use evidence-based examples, RPs must bear in mind that any responses will be made public. As a result, RPs need to be careful about what you share and be mindful that responses will be published.
Whether you like it or not, the government has made it clear that they wish to impose a rent cap on the sector. The only way you can have a say in this is to respond to the consultation by 12 October, so if you haven’t done so already, make sure you do this as soon as you can.
Samantha Grix, partner, Devonshires
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