Rent convergence would help to address the financial challenges faced by social housing providers across the country

However, worsening financial pressures for London’s social landlords are making it harder to achieve our shared goals. 

A recent report from London Councils revealed that boroughs will need to reduce real-terms spending on council housing by £264m over the next three years to avoid their Housing Revenue Accounts (HRAs) going bust.

This has been driven by a combination of dramatically rising costs and rent interventions that have left social housing providers facing acute financial difficulties. 

For G15 members, £2bn in rental income has been lost due to the abandonment of rent convergence in 2015. A similarly enormous gap has been left in boroughs’ budgets.

And while our income is squeezed, we are grappling with a range of urgent challenges requiring investment. Improving building safety, raising standards for our tenants, new regulatory regimes, decarbonisation – all of these need significant expenditure. 

Combined with rising construction costs, the financial pressures facing social landlords are a significant drag on our ability to deliver new homes.

Looming over all this is London’s housing crisis. Homelessness is at record levels, with one in 50 Londoners homeless and living in temporary accommodation. That figure includes one in 21 children, meaning on average there is at least one homeless child in every London classroom. The desperate shortage of affordable homes has left 330,000 households in the capital stuck on waiting lists for social housing.

Homelessness severely undermines people’s well-being, contributing to increased physical and mental health issues, and harms children’s development by disrupting access to stable education and support. Boroughs and housing associations are determined to help build the new affordable homes Londoners are crying out for – but we clearly need strengthened financial capacity.

This is why London Councils and G15 are calling on the national government to reintroduce rent convergence for the social housing sector, which is a crucial part of the solution to unlock new homes and address the housing crisis. 

Rent convergence ensured that social housing tenants in similar homes paid a similar rent, taking into account local incomes and property prices and establishing a national formula rent. This was a matter of basic fairness.

London social landlords were especially impacted by the decision to stop convergence, since the gap between formula rents and average rents remained relatively high in the capital when the policy ended.

We make this case on behalf of London social housing providers, but this is a national challenge requiring national solutions – and rent convergence would help to address the financial challenges faced by social housing providers across the country.

While always a last resort, the shortage of social housing in London (and the reliance on an unstable private rented sector) is a key factor forcing boroughs to relocate families to other parts of the country, exposing a deepening gap between need and capacity. 

“A return to rent convergence would pave the way for new social homes up and down the country”

A return to rent convergence would pave the way for new social homes up and down the country. The Securing the Future of Council Housing report, endorsed by more than 100 of England’s largest council landlords, identified rent convergence as a top priority. It therefore needs to be a central policy level in achieving the government’s twin objectives to deliver 1.5 million new homes and kick-start economic growth.

Of course, rent convergence is only part of the solution. Greater investment in the Affordable Homes Programme and a revisiting of the 2012 HRA debt settlement will also be critical to restoring stability to budgets and boosting housebuilding. Further to rent convergence, we also need a minimum 10-year rent settlement with rents rising by Consumer Price Index plus 1%, and full access to the Building Safety Fund. 

As we approach the Spending Review, we are urging the government to take the bold action necessary to fix the crisis in social housing finances, so that we can get on with building and delivering the next generation of social housing.

Ian McDermott, chair, G15; Grace Williams, executive member for housing and regeneration, London Councils