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Exclusive: Peabody plans to stop charging affordable rent
Peabody will freeze or cut rents on “thousands” of its affordable rented homes while converting market rent tenancies to social rents.
Brendan Sarsfield, chief executive of the 55,000-home landlord, described the move as “the start of the journey towards rent fairness”.
Writing exclusively for Inside Housing, Mr Sarsfield acknowledged that the policy meant the association would be “deliberately cutting our income” and could result in a reduced development programme.
Under the proposal, Peabody will convert the roughly 4,000 homes it currently lets at affordable rent to London Affordable Rent, a tenure outlined by mayor Sadiq Khan in his Housing Strategy, and which is more closely aligned to target rent, with an average rent of £153 a week for a two bedroom property. According to Mr Sarsfield this process has already begun. Furthermore, all new tenants in homes previously let as affordable rent will be offered tenancies at the London Affordable Rent.
In addition, from April next year the association will convert market rent properties to social rent tenancies.
Mr Sarsfield admitted that the plan “will take time”, while a spokesperson for Peabody said that the proposals were “aspirational and complex”.
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However, the decision is likely to benefit several thousand Peabody residents, who will have their rents cut or frozen at current levels. At present, 72% of Peabody’s stock is general needs, with “most of that” let at social rent, according to the spokesperson.
The radical new policy comes 10 months after the merger of Peabody and Family Mosaic. The combined group agreed a partnership with the Greater London Authority to build 6,000 “genuinely affordable homes” by 2021. Mr Sarsfield revealed that there is now land in place to start 2,700 of these this year, though not all of them will be at social rent.
“This would be impossible with the existing funding regime,” he explained. “But the objective is to build as many social rented homes as we can.”
Since affordable rent - which can be up to 80% of market rents - was introduced as a tenure in 2010, Peabody has charged around 65% of market rent on those homes.
This has meant that some tenants are paying around £80 more per week for their homes than others in similar properties.
Commenting on the difference in rents, Mr Sarsfield said: “As well as potentially causing hardship, the increase obviously adds to the housing benefit bill which has now ballooned to more than £25bn a year. Higher rents are not just a burden for our residents, but also for the general population and the government.”
Polly Neate, chief executive of Shelter, said: “Converting social rent homes to more expensive ‘affordable rent’ is one of the ways that the number of homes that are genuinely affordable in this country has been whittled away.
“As well as making it more difficult for struggling families to keep up with their rent, it has pushed up the housing benefit bill and undermined public trust in the very idea of affordable housing.
“It’s great to see a large social housing provider getting back to its core business and we hope this is part of a wider recognition of the need to provide the social homes for rent that families across the country are crying out for.”
Update: at 2.35pm, 03.05.18 This story was updated to clarify that only homes currently let as affordable rent will be offered to new tenants at London Affordable Rent levels.
At a glance: the different types of rent in London
Picture: Getty
Social rent: The amount of social rent a person pays depends on the location and size of the property, and is set according to a complex formula, but it is typically set at between 50% and 60% of market rent.
Affordable rent: Introduced by the coalition government in 2011, ‘affordable’ rent can be up to 80% of market rent, although many associations have been charging lower than this.
London Affordable Rent: A tenure introduced by Sadiq Khan that is lower than national affordable rent and based on target rent levels towards which social rents are gradually being raised. This makes it higher than average social rents in the capital, but in line with the rent that would likely be charged if a new social rent unit was built and set according to the same formula.
London Living Rent: A rental product aimed at middle-income Londoners introduced by Sadiq Khan, with rents set at one-third of average local earnings.
Target rent: A social rent level calculated by the government, which council and housing associations should use to move their social rents to over time.
