Earlier this year the UK government in the July budget announced that social landlords in England were to introduce a 1% cut in social housing rents producing savings of around £1.5bn annually. The policy at the time was criticized meaning that between 14,000 (Office of Budgetary Responsibility) – 24,000 (NHF) fewer homes would be built in England as a consequence.
Housing policy in Wales however, is devolved to Welsh Ministers and therefore the Minister for Communities and Tackling poverty has discretion on whether to apply this cut or not to Registered Social Landlords in Wales. Since the UK announcement, a modeling exercise was undertaken with the Welsh Social Housing sector to determine the impacts a 1% rent reduction would have. The modeling needed to take into consideration a range of factors impacting on the sector including uplift to the living wage variant due to come into force in April 2016.
Social Landlord business plans are predicated on modeling rents to deliver not only the Welsh Housing Quality Standard by 2020, but to maintain that standard over the 30 years of their business plan, many tenants voted for these plans in ballots when transferring their stock. Recent welfare reform changes has meant that landlords also need to do more for their tenants to help them sustain their tenancies through tough times, particularly as universal credit is being rolled out. This has meant growing their capacity to provide intervention support while also managing the potential impact rent arrears will have on budgeting plans.
In recent years the Minister agreed with the Social Rented Sector a Rent Setting policy which meant that rents in Wales could not increase more than the Consumer Prices Index (CPI) +1.5% plus £2. The Welsh Tenants were involved in those lengthy discussions and agreed to support the policy which meant that social landlord’s business models could deliver on both the WHQS programme and provide the steady growth required to meet housing need.
Today, on the 16th December 2015, the Minister agreed to maintain the Welsh Government Policy for Social Housing Rents for 2016/17. Under the existing policy, the maximum amount a Social Landlord would increase an individual tenant’s weekly rent is CPI +1.5% plus £2.
The rent uplift for Social Landlord properties covered by the policy for 2016/17 is therefore 1.4% +£2 as the previous September CPI was -0.1%.
The modeling undertaken by social landlord’s meant that to reduce rents by 1% or restricting an annual rent increase to 0.4% +£2 would have severe consequences for some social landlords particularly if applied cumulatively over the 4 years of the UK policy.
While we understand that some tenants are facing real hardship, many tenant representative members we have spoken to agree that reducing rents by 1% per week was hardly likely to make a profound difference to their standard of living while recognising that lenders confidence and other factors would impact heavily on the sector.
We do however recognise that social landlords need to do more to improve value for money of some aspects of their service and welcome efforts being made to improve service quality while also looking to drive costs down for renters.
For further information contact Steve Clarke, Managing Director Welsh Tenants