Rent chaos

If you are lucky enough to become a tenant of a social landlord, what should determine the rent you pay?

Should it be a national Government-set formula that takes account of local incomes and property values? Or the cost of providing the home? Or your landlord’s local policy? Or your income? Or what will enable you to work or to stay within some benefit cap? Or the name of the programme your home was provided under? Or whether your landlord is currently building new homes or not?

Labour’s rent policy for social housing, rent convergence, was criticised for being very top down, with Government dictating the rent of each social rented home in the country (well, almost). It related rents to regional incomes and property values through a complex formula. Over time it aimed to converge council and housing association rents (the latter being significantly higher on average), with the consequence that council tenants faced faster increases. In addition to social rented homes, there were also various schemes that aimed to provide homes at discounted market rents, with or without a bit of subsidy, which were gradually subsumed with shared ownership into the category of  ‘intermediate homes’.

Whatever the criticisms and inflexibilities of the rent convergence policy, it provided some stability for a decade. Landlords generally knew where they were and could plan ahead. Tenants saw rents rising more rapidly than inflation but in a controlled way and they were mainly treated fairly in that the same system applied equally to all. Yet quietly, behind the scenes almost, subsidy for investment declined and rents took more of the strain. And that meant that housing benefit costs also rose.

Since 2010 things have got a lot more complicated, and with increasingly random effects on tenants. The system is the same if you are offered a normal social housing re-let, but there are scarcely any new ones to consider. Following the first spending review, the Government put what was left of the housing budget into the so-called ‘affordable rent’ product, where rents could go up to 80% of market rents (compared with the typical 40-50% for social rented homes). But the actual rent was determined through the bidding and negotiation process between the developer and the Homes and Communities Agency, and the outcomes vary hugely. To make the ‘affordable rent’ scheme work, a share of social housing re-lets (believed to be around 20% of lettings currently, otherwise estimated at 82,000 homes nationally over the life of the programme) were ‘converted’ from social to ‘affordable’ rents – ie stolen from the social rented stock. Everyone got confused by the term ‘Affordable Rent’. This was a deliberate ploy, it was ‘intermediate rent’ masquerading under a different name and was anything but affordable.

Now it appears the Government wants to distinguish between the tenants of ‘developing’ housing associations and ‘non-developing’ ones, enabling the former to charge higher rents and have faster increases. It may be that someone in CLG can make sense of this, but to a new tenant entering the sector the rent they are likely to pay will seem to be almost random. And that’s before they start considering any implications for them of the benefit changes.

The rent you pay should not be so hit-and-miss: it should be related to some rational process of assessment. There are many possibilities. Linking social rents to market rents has always seemed a daft concept to me as the factors involved are so different and markets are unpredictable. The concept of rent pooling, with surpluses from older properties helping to meet the costs of newer ones, made council housing work through its best years. There is more interest in linking rents to incomes (the London Labour Housing Group has talked about a ‘London Living Rent’ of 35% of disposable income) but this would involve a means-test and any such system would have to make sure that landlords could cover their costs.

The Government is talking about setting out a long term policy for rents during the Spending Review. I personally doubt if they will produce any coherence out of the chaos they have created. Looking back, Labour’s rent convergence policy looks a better decision than it seemed at the time, but the tide of opinion is moving correctly towards having more subsidy for building, keeping rents down and making us less dependent on housing benefit.

In a little poll, 85% of Inside Housing readers have opposed the idea of placing developing and non-developing landlords on different rent regimes. I’m not surprised.

Courtesy of Steve Hilditch at Red Brick, and on Twitter @stevehilditch and @labourhousing