Rent and Service Charge Setting Policy
6. Rent setting - affordable rent
6.1
Affordable-rent properties are accommodation which Homes England or the Secretary of State has agreed can be let at an affordable rent.
6.2
Where an affordable rent is being charged, the maximum gross rent for a new tenant, inclusive of service charges, under a new tenancy is 80% of the gross market rental value for similar market rent properties in the locality.
6.3
'Gross market rent' means the rent (including any applicable service charges) for which the accommodation might reasonably be expected to be let in the private rented sector. Property size, location type and service provision must be considered when determining what gross market rent a property might achieve if let in the private rented sector.
6.4
Affordable rents are not subject to the Local Housing Allowance (LHA). However, the council will consider the local market context, including the relevant Local Housing Allowance, when setting affordable rents.
6.5
An affordable rent should be no lower than the potential formula rent for the property. In cases where an affordable rent would be lower than the formula rent, the formula rent is the minimum amount of rent that should be charged. To ensure that the rent is not set lower than the formula rent, a formula rent should be calculated for affordable properties for comparative purposes.
6.6 Changes to rents
The council must not increase rents for properties let on affordable rent terms by more than CPI+1% (CPI as at September of the previous year) in accordance with the Rent Standard. For rent periods that began in the 12 months from 1 April 2023 to 31 March 2024, this limit was subject to a 7% maximum amount.
6.7
The council can apply a lower increase, freeze or reduce rents.
6.8 Property valuations
A valuation of market rent must be made in accordance with a Royal Institution of Chartered Surveyors (RICS) recognised method. Property size, location, outdoor space and any services available must be considered when determining market rent.
6.9 Re-letting properties
When a tenancy of affordable rent housing is let to a new tenant (or re-let to an existing tenant), the council must re-set the rent based on a new valuation, to ensure that the new rent is no more than 80% of the relevant market rent at the time of letting.
6.10
If the accommodation is re-let to the same tenant because of a probationary tenancy coming to an end, the rent must not be re-set. In this case the rent may not increase by more than CPI+1%.
6.11 Conversion of affordable rent properties
Affordable rent properties must not be converted (including when they are re-let) to:
a) Market rent
b) Intermediate rent.
6.12 Rents for social tenants with high incomes
From April 2015, the government made it possible for social landlords to charge a full market rent where a social tenant household has an annual income of at least £60,000. Section 4.8 outlines Gateshead Council's approach to this.