What does the government’s rent convergence announcement mean in practice?

The impact that £2 a week, rather than £1 a week, will have on the sector is significant, so the higher figure applying for a majority of the rent settlement will also be welcomed. Ultimately, this increased income will provide crucial funding to comply with both current and incoming regulatory requirements relating to conditions.

What it is unlikely to do in most cases, however, is support the development of new homes, a key concern for affordable housing.

Nevertheless, this announcement has come as part of the government’s wider social and affordable housing package, which includes provisions on new funding and financial flexibility to accelerate housebuilding as part of a two-pronged approach.

“Ultimately, this increased income will provide crucial funding to comply with both current and incoming regulatory requirements relating to conditions”

But why is rent convergence so important? Many social rent tenants have rent levels that track below, significantly in some cases, formula rent level. This causes disparity in rent levels for comparable social rent properties that are charged the correct rent, and results in ongoing loss of income for registered providers – income which, in the current economic climate, they desperately need.

There are myriad reasons from the past for rents being below formula rent, including historical rent-setting differences and errors, as well as previous rent convergence application, to name a few examples. Those most affected are bigger providers that have large portfolios of old stock. This is a consequence of the fact that errors in rent-setting can only be remedied when a property is relet.

From April 2027 the government will allow an annual increase of CPI + 1 + £1 per week for social rent tenants whose rent tracks below formula rent. From April 2028, rent convergence of £2 above CPI + 1% will be permitted and this will run until a rent reaches formula rent.

The government has confirmed that rent convergence will be applicable for 10 years – the length of the new Rent Standard – which provides the very certainty that the sector wanted. This allows landlords to pin down their financial projections and plan their longer-term strategies.

However, this is said with a word of caution because we have seen previous governments tear up rent policy (dare I say the words ‘rent reduction’?) – but there is optimism in the sector that this will not happen, given the commitment to deliver 1.5 million new homes.

“In the coming months, providers will need to think about their communication with residents in respect of the additional £1 permitted next year”

We are fast approaching the time for rent increases, and most landlords have drafted their notices and are ready to send to the printers. However, with the uncertainty about how much and when rent convergence will be implemented, many have been in limbo since the Budget at the end of November 2025, when we were initially expecting the announcement. We now have certainty so providers can proceed with rent increases of CPI+1% only for 2026-27.

As always, care must be taken to get the notices right. In the coming months, providers will need to think about their communication with residents in respect of the additional £1 permitted next year. It is foreseeable that residents will not welcome this additional sum added to their rent, so transparency about why this is being applied, paying due attention to rents falling below regulated level, disparity between residents, and the cost of maintenance and increased regulation will be essential.

Robust control mechanisms are also going to have to be lined up to make sure the right level of convergence is applied in each year, it is applied only to relevant tenancies, and it is stopped when the relet rent has been met.

Given how complex rent regulation has been and currently is, this will certainly not simplify things.

Samantha Grix, partner, Devonshires