Housing association rents

Housing associations are charitable organisations whose mission is to provide affordable, good quality housing. The majority of housing association homes are let for social rent - on average around 50% of market rent - but housing associations provide a range of different types of rented housing including supported housing, shared ownership, affordable rent (up to 80% of market rent) and cross-subsidy market rent.

Rent is the main source of income for housing associations. This does not generate profits – rent paid to housing associations is re-invested into homes and services. Rent funds a wide range of housing association work including maintenance of existing homes, delivering services for residents and communities, upgrading and decarbonising homes, and building desperately needed new homes.

Since 2001, social rent has been set according to a government formula. This creates a ‘formula rent’ for each home, based on the relative sale value and size of the home, and relative local income levels – with the intention that similar rent is charged for similar social homes. The link to local incomes helps to keep social rents affordable.

The government then sets the maximum annual permissible changes for these rents by issuing a direction to the Regulator of Social Housing, to update the Rent Standard. This is commonly known as the ‘rent settlement’. The current rent settlement runs until 31 March 2026 and says that social rents can increase by up to CPI+1% each year. The government is currently consulting on a new rent settlement.

Rent convergence

In 2002, the government introduced a policy of ‘convergence’ to bring the rent of all social homes in line with the ‘formula’ rent over time. This was to address historic differences in rents across similar social homes that resulted from their having been built in different time periods, regulatory and financial environments. In 2015, the government abandoned the policy of convergence, which means the rent on some social homes is lower than formula rent. In 2023/24, 71.4% of homes paid social rents that were below formula rent.

Resident affordability

Housing associations believe that everyone should be able to live in a good quality home that they can afford. Rent-setting is a complex balancing act that needs to ensure housing associations are providing affordable housing to residents while maintaining the financial capacity to deliver good quality homes and services, meet strategic challenges (such as decarbonisation) and build the new homes our country so desperately needs.

The NHF and housing associations do a significant amount of work to improve the incomes of social housing residents. This includes work to improve the welfare system, improve residents’ employment outcomes and to lower energy bills.

What is the NHF calling for on rent?

Between 2016-2020, the government required housing association rents to be reduced by 1% every year. Since 2020, rent rises have been capped at CPI+1%, with an additional below-inflation rent cap of 7% for sitting tenant set during 2023-24. This means rental income in the social housing sector is 15% lower in real terms than it was in 2015. This equated to £3bn less income for the social housing sector in 2023/24.

As a result, development of new homes is slowing, and it has reduced the ability of housing associations to meet the investment needs for existing homes. On average, housing associations need to invest £40-50k per home by 2050 to ensure they are safe, high quality, decarbonised, and meet new regulatory requirements.

The NHF is calling for the government to commit to a 10-year rent settlement with annual increases capped at CPI+1% and a fair, and consistent approach to convergence. Ten years of rent increases at CPI+1%, together with convergence, would give social landlords the certainty they need to plan investment over the long-term, and would mean rent is affordable for residents and still lower in real terms than in 2015.

You can read more about our asks in our latest Budget and Spending Review submission.

Finance Policy Advisory Group
NHF response to Levelling Up, Housing and Communities Committee's report into 'the finances and sustainability of the social housing sector' (08 May 2024)
Why are we calling for change on the 53-week rent year? (30 January 2024)
Social housing rent increases in 2023 – NHF submission (13 October 2022)

Who to speak to

Sarah Finnegan, Head of Member Relations

0207 0671 188

sarah.finnegan@housing.org.uk

@sarahfinnegan80