Consultation on future social housing rent policy

* This page has been updated since it was originally published on 12 November 2024. 

In the 2024 Autumn Budget, the Chancellor announced a consultation on a new social housing rent policy, which proposed that social housing providers be allowed to increase rents by up to consumer price inflation (CPI) plus 1% annually for the period between 2026/27 and 2030/31. One of our key asks from the budget was to provide long-term financial certainty for our members and transparency for residents, so we broadly welcomed the consultation. However, it was only part of what’s needed to restore the financial capacity of the sector after decades of cuts. 

In planning our response to the consultation we consulted with NHF members through a comprehensive briefing sent to all chief executives, a webinar and various roundtables. 

Our response was submitted to the government on 20 December 2024 and you can read a summary below, or log in to download the full 20-page response. 

We expect to hear more about next steps, following the consultation in the new year and will update this page when we do. 

Summary of NHF response 

Top lines

• We welcome these proposals, which are a positive first step in fulfilling the government’s manifesto commitment to restore the financial capacity of housing associations.
• However, the proposals will not be sufficient to reverse the decline in affordable housebuilding. More action is needed for the sector to help the government achieve its target of 1.5m new homes while delivering on obligations to existing residents.
• We’re calling for further interventions both on rent and grant funding to support housing associations to accelerate new housebuilding, keep rents affordable and fair, and improve existing homes.
• Housing associations have seen their financial position deteriorate in recent years, with interest cover falling from 128% to 103%, and repairs and maintenance spending increasing from £6.5bn to £7.8bn between 2022 and 2023. These trends are expected to accelerate in future years and will put a significant dent in the sector’s capacity for development without a package of interventions (rather than a ‘pick and mix’) designed to address the cost pressures behind them.
• Specific changes to rent policy for supported housing and housing for older people are needed, in addition to a wider package of reforms to revenue and capital funding, in order to maintain viability of some schemes and encourage new development to meet changing population need.

Rent policy

• We are asking for a convergence mechanism to be included in the settlement, allowing housing associations to gradually increase rents that are below the earnings-linked rent formula.
• This measure would restore housing association financial capacity, especially in areas where it is most constrained (such as London), while remaining affordable to residents.
• We estimate a convergence mechanism could unlock 90,000 new homes by generating £3.5bn in additional rental income over 10 years.
• An additional £3 per week in convergence would be affordable to residents relative to income – even for those on the lowest 10% of incomes – and would only result in an increase of up to 0.6% in overall welfare spending on housing support by 2030.
• The longer the rent settlement lasts, the better. Our preferred option is 10 years as this will give housing associations and their investors greater certainty and enable longer-term, more efficient investment decisions.
• We have consulted with our Tenant Advisory Panel (formed of housing association tenants across England) who were generally supportive of these asks, while emphasising the need for affordability for residents and long-term certainty on rent policy.
• It is vital that this settlement is adhered to for its full duration. To amend it part-way through would significantly damage investor confidence in the sector.
• We support a rolling settlement, if it is structured in a way that allows CPI+1% (and convergence) to roll on as default without consultation, so that there is a minimum of five years of certainty, but for the government to consult five years in advance if it wants to change the settlement.
• We are calling for additional rent flexibility for supported housing and housing for older people schemes, rising from 10% to 20%, so rents can better reflect the additional non-service-related costs of building and maintaining these schemes.

Other forms of support

• A satisfactory rent policy (CPI+1% and a convergence mechanism) is essential to restore financial capacity to the point where housing associations can combine capital funding for new homes with private finance at a higher level than is currently possible.
• We encourage the government to bring forward its plans for the successor to the 2021-26 Affordable Homes Programme as quickly as possible and hope to see more funding and higher grant rates.
• Modelling carried out by some of the largest developing housing associations shows the intervention that would have the biggest impact on the development of new homes is grant for existing homes. These housing associations would have the capacity to deliver 82% more homes over 10 years than under current plans assuming grant rates of £800 per home per year and a convergence policy were introduced.
• Grant for existing homes would alleviate cost pressures arising from energy efficiency upgrades, higher standards for existing homes and building safety remediation costs, freeing up capacity to build more new homes.
• Regulatory clarity and stability, as well as adequate time to prepare for the effects of new regulations and legislation, will also help housing associations to plan investment programmes more efficiently.
• Without this package of measures, the sector will struggle to maintain new supply at current levels, let alone deliver the significant acceleration in new social and affordable housing supply that is desperately needed by over four million people in England in need of a good, safe and secure home, and to meet the government’s pledge to build 1.5m homes.