Fairer rents with the reintroduction of rent convergence and long-term certainty
We welcome the certainty the government’s confirmation of the cap on social rent increases in 2023/24 provides. The impact of capping social rents at 7% across the G15 by 2030 will see around £800m less in reinvestable income be available. This will mean difficult choices on how and where we invest resources, in the face of growing challenges.
The current rent standard runs until 2025, but has already been varied due to the high level of inflation. In light of this, a long-term rent policy supported by government is essential for organisations to meet the needs of our residents, and to invest in existing and new homes. Alongside bringing forward a consultation on the post-2025 rent standard, a key measure that should be considered is the reintroduction of rent convergence.
Rent convergence was intended to bring rents in social housing into alignment. Recognising rent levels historically reflected when and where housing had been built, often over a long-period of time, changes in subsidies, and different rent policies; rent convergence sought to end arbitrary differences. The principle of rent convergence was one of fairness – people should pay similar rents for similar properties, whilst remaining well below market rates. The mechanism operated for 15 years, with increases in rent capped within a formula to ensure a smooth transition to the new level over time. From 2015/16, rent convergence was ended.
The G15 has calculated that 29% of members’ homes covered by the rent standard are currently below target rent. This leads to an annual shortfall in rental income of £67.7m. The rent cap and lack of rent convergence combined, mean G15 members’ reinvestable income will be £2bn lower by 2030 than if the standard rent formula and rent convergence had been followed. Reintroducing the rent convergence mechanism, would off-set some of the impact of the rent cap and provide more resource for providers to invest in existing homes. We would welcome the opportunity to discuss this further with government.
The government can:
- Confirm rent convergence will be reintroduced
- Set out a timeline for consultation on the post-2025 rent standard