Campaigners have warned that many social housing tenants will simply be unable to afford rent rises next year, after the Chancellor announced a cap of 7% on social rents in the autumn statement.
While the cap has been presented as a beneficial move for social tenants, as rents are generally tied to inflation and rise by the CPI measure plus 1%, the 7% cap was the highest of three options put forward by the government following a consultation earlier this year.
Experts warn that the decision will “heap more pressure on household budgets,” for millions of people.
Tenants ‘cant and won’t pay’ rent rises
The Chancellor announced that rent increases for social tenants would be capped at 7% - the highest of three options put forward by the government following a consultation earlier this year.
Generally, social rents increased are tied to inflation, rising by the CPI rate plus 1% each year.
However, after tenants and campaigners raised concerns that this could see social rents rise by more than 11% next year, the government carried out a consultation on the rise, offering three options; 3%, 5% and 7%.
The Social Housing Action Campaign (SHAC) which represents tenants in the sector has warned that "people can’t pay and won’t pay rent rises".
The 7% cap will prevent social landlords - housing associations and local authorities - from increasing rents by more than 7%, although no such limit will be placed on service charges, which often increase by more than inflation. Some landlords may opt not to increase rents by the maximum amount over concerns about affordability.
Suzanne Muna, secretary of SHAC, said tenant organisations have been calling for a freeze on rents for social tenants and shared owners, and service charges, plus an eviction ban.
She said: “It’s a pity that the government has gone in the opposite direction and decided that tenants and residents should be asked to pay for the failures of the housing market.
“Our members have made it clear that they are already having to move further along the path of borrowing and debt. In some cases, that path will come to an end and they will end up defaulting on rents. This was already happening.
“What is less easy to show in the statistics is the sheer misery and despair that this is causing. The physical harm when people can’t eat properly or heat their homes, the mental health crisis when people can’t cope with all the worry. The impact on children and the elderly whose lives are being disrupted by these cruel policies.
“There are alternatives, like a much higher tax on the companies that have done well out of the soaring energy prices for example. But the government has chosen to inflict hardship on those with the least political influence and lobbying power.”
7% cap will ‘heap more pressure on households’
Two major organisations in the housing sector came out in favour of a cap of no less than 7%, warning that mandating lower rent increases would lead to reduced investment.
The National Housing Federation (NHF) and the Chartered Institute of Housing (CIH) both warned the government that capping rent increases below 7% from next April could prevent social landlords from investing in homes in the future.
OpenDemocracy reported that a housing association body had lobbied the government to warn against a freeze on social rents prior to the consultation.
G15, which represents a number of housing associations including Clarion, L&Q and Peadbody, wrote to the Department for Levelling Up, Housing and Communities in July warning against freezing social rents.
Alex Diner, senior researcher at the New Economics Foundation, warned that the 7% cap will provoke “concern and anxiety” for social tenants across the country.
He said: “More of the most vulnerable people, who are already facing skyrocketing food and energy bills, are likely now to be plunged into further financial hardship by this government’s decision.
“Instead of heaping more pressure on household budgets, the chancellor should have frozen rents and plugged the £3.2bn gap in social landlords’ budgets so they can invest in building and maintaining good quality social homes. Instead, we now face a new housing crisis with fewer new affordable homes being built, and tenants struggling even more to pay the rent.”