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Let's talk rents

Housing associations should have control over their own rents, says David Orr

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Let's talk rents

There has been much frank, fierce and feisty debate over the past few months focusing on the array of new policies and developments that will affect us for years to come.

However, amid the talk of Starter Homes, Right to Buy and homeownership it feels like the discussion around rented homes and rent levels is too often being left by the wayside.

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This is partly understandable.

It is the government’s stated ambition to “turn Generation Rent into Generation Buy” and housing associations are able, through shared ownership and market sale, to contribute to that aim.

But our job and the core reason for our existence is to provide affordable homes for people who cannot access the market.

Rented homes still comprise the huge majority of the 2.5 million properties housing associations provide.

And, as the act of buying that first house becomes ever more onerous and market rents continue to increase, it is imperative that there is an affordable and diverse rental sector for people who can’t afford the housing the market has to offer.

Continuing to have a great and genuinely affordable rented offer is of paramount importance for the health of the housing market. And yet the government’s policies in this area are neither as clear nor as simple as they could be.

Currently, the government decides how much rent housing associations can charge as well as the tenant’s ability to pay.

Approaching the policy from both ends has created consequences and unnecessary uncertainty.

For example, the 1% rent cut announced in the 2015 summer Budget was closely followed by the announcement that housing benefit for housing association tenants would be capped at the Local Housing Allowance (the maximum amount a tenant can claim living in private rent).

“Being in control of their own rents would also give housing associations the certainty they need to continue to borrow and plan long-term to build the houses this country greatly needs.”

Whatever the arguments for or against either the rent cut and the Local Housing Allowance (LHA) cap – and my opinions on this are well known – the way these policies came in close succession led to systematic and contradictory reviews across the sector and considerably greater uncertainty that distracted housing associations from their practical attempts to build more homes. They also added to the confusion – or as I prefer to call it the abject shambles – of current rent levels.

The government recently announced a one-year deferral of the LHA cap for supported and sheltered housing of course, and we will be working to protect those vulnerable tenants as a priority. Apart from that the question as to whether the cap for general needs accommodation is here to stay remains to be seen.

What is clear though is that the government will no longer support an open-ended housing benefit bill.

What is equally clear is the government’s overriding policy ambition to boost homebuilding. Any serious attempt to do so will involve housing associations which wish to see a big increase in their output of new homes across all tenures.

But they are hamstrung by short-term rent settlements and uncertainty about future income. So – how do we think we could cut through this Gordian Knot of competing priorities?

Well, it is something we have asked for before: that the government gets out of rent-setting altogether and leaves this to the boards of housing associations – the people who have the legal obligation to deliver their objectives and a clear social mission to fulfil. This would allow housing associations to set higher rents in some markets for some people and, critically, to set lower rents for those on the lowest incomes.

Government interests are protected by the limitations they set on housing benefit, which becomes an issue boards would take account of in setting rents, helping to control the benefit bill but not the de facto rent. And it means that future income streams and investment decisions fully rest where they should – with boards.

This freedom would mean housing associations could alleviate the pressure on some of the most hard-pressed tenants and respond to different local markets and housing need without an overall increase in the housing benefit bill or the rents they charge.

Being in control of their own rents would also give housing associations the certainty they need to continue to borrow and plan long-term to build the houses this country greatly needs. This would be a clearer, more sensible, fairer and more accountable system for housing associations and their tenants.

As independent businesses, housing association boards have a legal obligation to protect the long-term financial viability of their business.

It would also make a powerful statement to the Office for National Statistics (ONS) as we seek to work together to reverse their reclassification from last autumn. In short, it would create a freer, stronger sector, providing best value for the tenants and taxpayers and giving us the best possible basis for helping to end the housing crisis.

David Orr, chief executive, National Housing Federation

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