Rent and Service Charge Setting Policy

3.1       

Since 2001, rents for properties let at 'social rent' (which are the majority of council housing properties) have been set based on a formula set by the government. This creates a 'formula rent' for each property, which is calculated based on several factors including property value, local income levels and property size. This approach aims to ensure that similar rents are charged for similar social rent properties.

3.2       

In 2011, the government introduced 'affordable rent' which permits rents to be set at up to 80% of market rent (including service charges). Landlords can only let new properties at affordable rent or convert social rent properties to affordable rent where certain conditions apply.

3.3    

From April 2016, the Welfare Reform and Work Act 2016 required social landlords to reduce their rents by 1% each year for four years (the 'social rent reduction').

3.4   

In October 2017, the government announced its intention to set a long-term rent deal for both local authority landlords and housing associations that permits annual rent increases on both social rent and affordable rent properties of up to Consumer Price Index (CPI) plus 1 percentage point (CPI+1%) from 2020, for a period of at least five years. It did not override landlords' statutory obligation to complete the four-year social rent reduction as required by the Welfare Reform and Work Act 2016.

3.5    

The new policy from April 2020 recognised the need for a stable financial environment to support the delivery of new homes and to enable registered providers to plan ahead. The increases from 1 April 2020 of CPI+1% is a maximum amount and councils could apply a lower increase, freeze or lower rents if they wished to do so.

3.6    

This policy came into effect from 1 April 2020. Where a landlord had not completed the social rent reduction by 31 March 2020 (because its rent year begins after 1 April), it was required to complete the reduction before applying the policy.

3.7   

To control this new settlement, rather than legislate, the government required the Regulator of Social Housing to prepare a new Rent Standard to apply from 2020 to all registered providers of social housing, including councils.

3.8    

From 1 April 2020, registered providers, including councils, must comply in full with all the requirements and expectations set out in the Rent Standard. They must also comply with the Rent Policy Statement on Rents for Social Housing 2019 on the setting, increase and decrease of rents and service charges.

3.9     

In 2023/24, due to high levels of inflation, the CPI+1% limit on annual rent increases was replaced by a 7% maximum increase. This meant that, in that year, registered providers could increase rents by up to 7%. This restriction applied to both social and affordable rent homes, except for supported housing as defined in the government policy statement.  Gateshead Council applied it to all council-owned homes in the HRA.

3.10   

The CPI+1% limit on annual rent increases does not require registered providers to reduce rents should CPI fall below minus 1%.

3.11  

In January 2024 the regulator confirmed the limit on annual rent increases for 2024/25 to be CPI+1% and in April 2024 it was confirmed this formula will continue to apply to rent increases in 2025/26.

3.12  

In the Autumn Budget on 30 October 2024 the government announced it is consulting on a new long-term social housing rent settlement from 1 April 2026 of CPI+1% for at least 5 years to offer certainty for social housing providers. The consultation will run until 23 December 2024.