Why we need to talk about social rents

Published on August 7, 2019

Published on August 7, 2019

By Ron Hollis, London Tenants Federation Treasurer

It’s already been four years since George Osborne announced his big giveaway to social housing tenants in the summer budget: a four-year 1% reduction in social rents, starting in 2016. Whoopee! Unfortunately, many tenants had to spend their savings on increased service charges, which weren’t included in the bonanza.

With 2020 looming, it is worth reminding ourselves why it was that a 1% reduction in rents over four years was introduced: to tame the Housing Benefit bill. Because one clear outcome of consecutive governments’ interventions in social rents has been, at least in London, to push them up: by a lot. Our research on council rents in London has found that average council tenants’ rents across London boroughs increased by an estimated 90% between 2002 and 2018.

For social housing tenants across the country and especially in London, the biggest con of the past decade has been the much-ridiculed use of the word ‘affordable’ as rents set at anything up to 80% of market rent.

Alongside stagnating incomes and the introduction of the housing benefit “reform”, this policy has done nothing but compound London’s social housing crisis: 13% of social renters in London are overcrowded (compared to 5% nationally) and in the fifteen months to June 2018, 2,500 homeless households were moved out of London completely.

And all this has overshadowed a slower burning yet equally problematic policy failure: ‘rent restructuring’.

Introduced by Labour in 2002, ‘rent restructuring’ aimed to reduce ‘arbitrary’ differences between the rents paid by council tenants and the higher rents typically paid by housing association tenants. It involved setting a ‘target’ for council and housing association rents to meet within ten years, via annual rent increases. Because the target rent was partially tied to market prices, the target rent in London was significantly higher than existing social rents.

Fast forward to 2019 and, despite a three-year extension of the policy to 2015 it has not only failed on its own terms (in London the gap between council and housing association rents has if anything widened since 2002), it has spawned its own arbitrary inequalities.

As of 2016, new council tenants in London are paying more than their older neighbours for the same service, thanks to the Welfare Reform Act, which advised councils to re-let vacant properties at full target rent levels or more (taking into account the government’s temporary 1% per year rent reduction, ending this year). In Islington, for example, new tenants are paying £6.48 more per week than the average for existing tenants. This rises to as much as £41.39 where they are new tenants of a Private Finance Initiative (PFI) managed home that are exempted from the 1% rent reduction.

Both the Localism Act and ‘rent restructuring’ promised to offer more choice to social housing tenants or, as Grant Shapps put it in 2010, ‘alternatives to traditional social rent’. As we argued back in 2002 and is still the case, this only means choice for those who can afford it – and in London there are growing numbers who cannot.

The 1% rent reduction was political short termism which served only the chancellor at the time. That said, the criticism it received by housing associations and councils, who argued that it would put their business plans and development pipelines at risk, puts into focus why we need a thorough, tenant-led conversation about social rents.

As government cuts continue to bite, councils and housing associations are increasingly looking (with government encouragement) to their tenants’ rents to help them secure bonds and loans to fund new housing. But is it fair or realistic to put all this on the shoulders of social housing tenants, many of whom are on the lowest incomes?

In 2002, before rent restructuring began, council tenants spent on average 29% of their incomes on rents and service charges combined. In the years just before the 1% rent reduction was introduced, tenants spent on average 35% of their incomes on rent, with service charges on top of that. With rent increases due to return to 1% above inflation next year, the disparities among social housing tenants, and the mounting pressure on those least able to pay, will only grow.

That is, unless we act.

London Tenants Federation are currently producing a series of briefings on social rents in London.

Click here to read the first in the series.