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Landlords call for return of rent convergence in response to regulator’s consultation
Social landlords have used a consultation about setting rents for social housing to call for the government to reintroduce convergence rules that would allow them to increase rents on some of their homes.
In February, the government outlined plans that mean social housing rents will rise by the Consumer Price Index (CPI) measure of inflation plus 1% for five years from 2020, ending four years of annual 1% rent reductions for social landlords.
As part of the changes, the Regulator of Social Housing (RSH) published a new draft Rent Standard that outlines the rules around the management and setting of the new five-year rent settlement.
It invited registered providers, local authorities, tenants, lenders and other stakeholders with an interest in social housing to comment on the draft document and has now published the responses.
While respondents were broadly positive about the changes, a number expressed disappointment that the document did not include any plans to help increase rents on some properties faster.
A total of 14 respondents mentioned being impacted by the convergence scrap and being unable to raise rent levels to its rent target.
The government scrapped convergence in 2015, meaning that social landlords are no longer able to increase rents by an extra £2 a week to gradually align properties with their target rent and ensure that similar social homes in similar areas charge similar rents.
They now have to wait until properties are re-let – which can take many years.
In its response to the consultation, Gateshead Council said this system “locks [it] into low rent levels and reduces [its] potential for future investment”.
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It also said that it would prefer a longer guaranteed minimum term for the rent settlement of 10 years, rather than five, to provide greater “financial stability”.
Bristol Council said it was “disappointed” that the Rent Standard does not allow for a return for rent convergence. “Over one-third of our homes have rents below formula and it will take many years (if not decades) for those homes (aprox 10,000 properties) to reach formula through adjustment at relet,” it said, adding that this affects it business plan.
Meanwhile, Town & Country Housing said that although limiting the increase to CPI +1% would help keep rents affordable for tenants, it also wanted the government to bring back convergence because “a significant proportion” of its social rents are substantially below formula rent.
“This is a huge opportunity cost which directly impacts our ability to service additional loans and build more urgently needed social rented units. We do not believe it is fair for these units to receive higher subsidy at the cost of other households who could be housed in newly developed units,” the organisation said.
Nottingham Council said it has around 16,000 homes, around two-thirds of its stock, which have not reached the target rent level. As the Rent Standard currently stands, these homes will never reach convergence, it said.
The RSH said almost 93% of respondents to the consultation felt that it had “accurately reflected the requirements of the direction in its proposed Rent Standard”.
Around 81% said the information made available with the policy statement gave providers an appropriate level of clarity about the new rules on rent with they would be required to comply with.
Fiona MacGregor, chief executive of the RSH, said: “Having consulted with a wide range of stakeholders and taken into account their feedback, we are confident that our new Rent Standard, which will come into effect from April 2020, reflects the government’s direction which it had previously consulted on. It updates our role with regards to monitoring local authority registered provider rents.”
