Time for a more thoughtful look at rents

Following the rent settlement announcement, it is time to have a real think about how rent-setting can be made affordable, transparent and consistent, says Riverside’s Chief Executive Carol Matthews.

The sector has celebrated the return (from 2020/21) to maximum rent increases of CPI + 1%. At Riverside, we welcomed the announcement too, and the impact it will have on the ability and capacity of housing associations like us to rise to the challenge of contributing to a new target of 300k homes each year.

In fact it feels like we’re on a bit of roll, with the abandonment of Government plans for LHA caps, the end of the pernicious seven day waiting period for UC, the first proper funding for real social housing in years, and the reclassification of housing association debt off the public sector balance sheet.

Christmas appears to have come early.

However the recent JRF report (UK Poverty 2017) is a sobering reminder that not everyone is going to have a happy Christmas. The press release headline says it all: “UK Poverty 2017: Country reaches turning point after rises in child and pensioner poverty”. The think tank reports that 400,000 more children and 300,000 more pensioners are now living in poverty than was the case in 2012/13. And it’s not just the JRF who are sounding the warning bells: the IFS too has published recent forecasts on the rise of child poverty until the end of the current Parliament.

This presents a real challenge for housing associations, especially as the sector debates what it is and who it is for. How do we get the right balance between building more and easing the housing market, whilst ensuring our homes are truly affordable for those described in the JRF report? Of course we must build, but if housing associations don’t stand for the poor, then who does? If ever there was a time to renew our vows and look to our original purposes, then it is surely now.

So back to that five year rent settlement. Before we revert to a crude default position of maximising rent increases at a time of very slow wage growth and benefit freezes, let’s take a bit of time to have a more thoughtful conversation about rents.

Here’s what’s on our agenda.

  • Affordability – We need to develop a far better understanding of what affordability means for different household types, living in different housing and employment markets. Taking a crude percentage of national or regional incomes is no longer good enough. We need to understand local income distributions for different family types, before we can really get to grips with this. The Federation has made a good start through the modelling work undertaken by its Task and Finish group, established to consider what a post 2020 rent settlement should look like. We must continue this work, to equip ourselves to make proper, evidence based decisions about rent levels and increases.
  • Transparency – I’d like to call for far more transparency about how rent setting (and increases) work. It’s hideously complicated, so dependent upon an individual association’s history in terms of age, development, stock transfers, mergers, etc. But if we fail to explain how rents work to customers and other stakeholders (including politicians) a climate of mistrust will persist, undermining any long-term move towards greater freedoms and flexibilities. How can we engage in a meaningful conversation about affordability, if the facts are obscured for our customers?
  • Consistency – Of course, once we are more transparent, we will reveal just how crazy and inconsistent our rent setting has become because of layer upon layer of legislation and regulation. How do we justify to neighbours a variation in their rent of perhaps 20%? So that leads to my final point. Assuming there will need to be a new rent standard from 2020, can we explore one which permits associations – in the context of greater transparency – to measure compliance on the basis of pooled income, rather than individual rents? The idea of rent envelopes is not new, and presents its own difficulties especially as stock numbers change. But can we please be trusted to manage our portfolio of rents and, over time, iron out those inconsistencies where we can, without blowing a huge hole in the benefit bill?

2020 may be some time off, but it will arrive soon enough. Let’s not waste time come this January. Let’s make 2018 the year when we make significant strides in cracking affordability, transparency and consistency.

This article was first published in Inside Housing on 8 December 2017.