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Rent rises to be lower than expected

New intermediate rents will be set at 80 per cent of local housing allowance levels not of open market rent, Inside Housing understands.

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Chancellor George Osborne last week announced new tenants will be offered rents of 80 per cent of market levels.

But it has now emerged rents will be set at 80 per cent of LHA, which will be capped at between £250 and £400 per week depending on property size. This would mean rent increases would be slightly lower than originally expected in some areas of the country.

The LHA limit for a two bedroom property will be £290 per week, while the average open market rent for a two bedroom home in London is £310 per week. A rent based on 80 per cent of the LHA level would therefore be no more than £232 per week and not the £248 it would be in the capital if rents were based on 80 per cent of market rent.

The average social housing rent for a two-bedroom house in London is currently £95.

Inside Housing also understands that no government funding will be provided for traditional social housing once existing commitments have been met.

The £4.5 billion spending programme for 2011 to 2014 announced in the spending review includes £2.3 billion of agreed spending, £200 million for mortgage rescue and £100 million for empty homes. The remaining £1.9 billion will fund new affordable homes.

Landlords will be expected to set rent at 80 per cent of LHA in most cases. To set a lower rent and qualify for funding they would need to explain how doing so would enable them to build more homes.

Following further information from the Communities and Local Government department it appears some details in this story are inaccurate. Rents will be set at 80 per cent of market levels, but will not be allowed to rise above LHA levels. We apologise for any confusion, the story was based on information from senior CLG officials and as such we had no reason to doubt it was correct. The original story will be left here so the comments made below remain in context.

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