The rent for social housing in the UK will increase more than inflation over the next decade as the UK pushes to build affordable homes.
UK Housing Shortage to Be Addressed
Labour has been trying to address the UK’s housing shortage, deemed a “crisis,” by implementing policies to support and prompt more construction.
109,000 Households Affected in Housing Shortage
According to government data, the chronic housing shortage has left approximately 109,000 households in England living in temporary housing, including almost 142,000 children.
Introduction of Ten-Year Formula Key
Chancellor Rachel Reeves is developing a ten-year formula for calculating social housing rent, which will give certainty to local authorities and housing associations.
The Rent Rise Is to Boost Construction
The rise is part of the government’s plan to increase the construction of affordable homes while strengthening the financial stability of landlords facing financial difficulties.
Annual Rent Rises Based on Consumer Prices Index
The formula will calculate the social rent on homes, leading to annual rent increases based on the consumer prices index.
Consumer Prices Index Coming in at 3,2%
The consumer prices index currently stands at 2,2% plus an additional 1%, effectively removing the existing cap on rises.
3,8 Million Social Rent Households
There are 3,8 million social rent households in England, and due to the government-imposed caps, these households have been protected from inflationary increases in previous years.
Government Housing Benefit Bill May Potentially Rise
However, it means that these households will now be affected and will have consistently higher rates. This will likely be added to the government’s housing benefits bill, benefiting them in the long run but impacting them in the short term.
Rise Will Worsen Cost of Living Crisis
This is a precarious situation for tenants as it could worsen their general cost of living and result in a higher government benefits bill.
Rent Rise to Offer “Financial Stability”
The rise in rent initiative aims to promote the construction of more affordable homes by offering financial stability to housing associations and councils facing severe debt and substantial maintenance backlogs.
1,5 Million House Pledge
The Deputy Prime Minister, Angela Rayner, has pledged to build 1,5 million affordable and social homes in the next five years to address the housing crisis.
Local Authorities Have Almost Stopped Construction
Previously, local authorities have almost stopped all building endeavours, leaving it up to the housing associations to build the new social housing in the UK.
Housing Policies to Back Building Schemes
However, Rayner has been pushing to boost social homes and has laid out the housing policies that support the target, including “rent stability.”
“Appropriate Protection” Against Rent Rise Promised
In addition, she said that the policies would help deliver the “biggest increase in affordable house building in a generation” and promised “appropriate protections” for tenants against notable rent rises.
Large-Scale Housebuilding Drastically Reduced
Councils have downscaled their large-scale housebuilding, which has contributed less than 2% of the new homes in the country over the last forty years.
Housing Associations Left to Build Social Homes
Housing associations now build most of the social housing and have significantly slowed down development spending. Instead, they have opted to invest in existing property after various scandals exposed substandard conditions in their housing stock.
National Formula to Be Good News
The government has set rent levels in subsidised social housing using a national formula, which should be good news for the housing associations.
Long-Term Agreement Key for Investors
Andy Hulme, the chief executive of the housing association Hyde, stated that a long-term agreement would be crucial in attracting additional private-sector investments in further construction.
Anticipated October Budget Looming
In the much-anticipated October Budget, Reeves will introduce her 10-year formula, which should give everyone some certainty about rents between 2025 and 2034. This formula should allow housing associations, local authorities, and tenants to predict future rents, providing much-needed peace of mind.
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Featured Image Credit: Shutterstock / Martin Suker.