Jump to content

16 November 2022

How housing associations keep rent affordable for tenants

How housing associations keep rent affordable for tenants

What is rent for?

Setting affordable rents is one of the most important decisions housing associations make each year. It is at the heart of their mission as not for profit organisations to provide homes and alleviate poverty. It is a decision that carefully balances affordability for individual tenants with investing in the high quality homes and core services that they rely on.

Housing associations in Wales own and manage nearly 170,000 homes, and rent makes up about three quarters of their total income. The majority of their income is spent on managing, maintaining and improving existing homes. This includes things like day-to-day repairs and maintenance, to upgrades on kitchens and bathrooms, to the provision of financial advice and support for people to maintain their tenancies.

Along with investment in existing properties, the next biggest item of spending for housing associations is in building the new homes Wales needs. In 2021/22, Welsh housing associations made a record investment of nearly £455m in tackling the housing crisis in Wales.

Who decides how much rent rises by?

Housing associations and local authorities set their rent levels each year in the context of Welsh Government’s policy for social housing rents. This policy states that affordability must be considered and evidenced when setting rents each year, and housing associations are required to demonstrate to the Welsh Government and the social housing regulator how they have done this. This policy also places affordable rent in the context of broader housing policies, including the quality of homes, energy efficiency, tenant satisfaction and maintaining tenancies, recognising that rental income provides the high quality homes and services that tenants rely on.

The policy, due to run from 2020/21 until 2024/25, states that the total rent a social landlord charges cannot be uplifted by more than the rate of CPI inflation + 1% each year, as long as CPI is not outside the range 0-3%. In the past two years - as CPI has far exceeded the original limits set out in the rent policy - the Minister for Climate Change, Julie James MS, has had to take a separate decision on rent increases, one that strikes a balance so that tenants are charged a rent that they can afford and that not for profit housing associations can remain viable, providing good quality services and building new homes. For financial year 2022/23 the limit was 3.1%, the rate of CPI at that time. The 2023/24 settlement has been set at a maximum of 6.5%.

The total rent limit set by the Welsh Government is a ceiling, not a target. It is not a blanket increase across all social rents. Housing associations are committed to ensuring that rents are affordable for their tenants, and they use flexibility within their budgets to ensure this. Under the rent policy individual rents can be reduced or frozen, or can rise by up to an additional £2 above CPI +1% where this can be shown to be affordable for tenants, but the total rent increase across all homes still cannot exceed CPI +1%. Last year 74% of housing associations used the flexibility in the settlement to freeze or reduce individual rents.

How do housing associations set rent?

Within the parameters of the Welsh Government’s rent policy - or in recent years the decision by the minister for climate change - housing associations do a lot of detailed work to understand affordability for their tenants, including gathering data and speaking directly with tenants. They also need to understand the costs set out in their business plans, which include managing, maintaining and improving existing homes and services, as well as developing much needed new homes. Housing association boards work with senior staff to interrogate the evidence available and determine how rents will reduce, freeze or rise across all the homes they own for the financial year ahead.

How do housing associations make sure that rent is affordable?

Housing associations have developed local rent policies, and use a range of tools to ensure that the rent is affordable and set in discussion with tenants. Tools and approaches include:

  • engagement with tenants and their feedback;

  • affordability data tools, such as the CHC/Housemark tool;

  • affordability models, such as the Joseph Rowntree Foundation living rent model;

  • drawing on data sets such as ASHE local income, OECD data benchmarking, rent levels in the social and private rented sector, and local housing allowance rates;

  • understanding wider financial pressures on tenants including household costs and energy bills, and service charges;

  • driving value for money to reduce the pressure on rental income.

In 2020, we worked with our members and partners to develop a set of affordability principles to guide approaches to rent setting. All housing associations in Wales have now adopted these affordability principles, which inform their approach to rent setting.

Affordability principles

Affordable: We will consider the total costs of renting homes and incomes to understand what is affordable for our tenants, and ensure that tenants have the greatest opportunity to sustain their tenancies and thrive.

Sustainable: We will set rents that allow us to continue to provide high quality, safe, warm homes for the people who need them in the communities we serve.

Engage: We will involve tenants to develop and review our approach to rent setting, and inform our decisions on rents.

Fair: We will work to ensure that rents and other charges are set fairly and our homes and services represent value for money.

Accountable: We will be open, transparent and accountable when we make decisions on rents.

What support is in place if tenants struggle to pay their rent?

Housing associations exist to support their tenants, and have specialist teams and services on hand to ensure that tenants experiencing financial difficulties are able to access the help they need. The message housing associations share with tenants who are struggling is always, ‘talk to us, we can help you’. Housing associations have committed that no one will be evicted from their homes due to financial hardship, where the tenant engages with their landlords.

Help available to tenants includes:

  • Income maximisation support - this includes support with discretionary assistance fund applications, navigating the welfare system, seeking support for energy costs, supplying food bank vouchers and wider support.

  • Employability support - this includes working wardrobe, training and support for CV writing and job searches.

  • Keeping energy bills low - this includes fuel clubs which allow communities to bulk buy oil, lowering the cost to each individual tenant, energy wardens and signposting to advice and support.

  • Hardship funding - housing associations have made funding available to support tenants directly. This year, thirteen housing associations alone have made £525,000 of funding available.

Will tenants be evicted if they can’t pay their rent?

Housing associations have committed that no one will be evicted from their homes due to financial hardship, where the tenant engages with their landlords. Their role in providing housing goes far beyond bricks and mortar, to helping tenants to build a home and supporting them to live well. Housing associations exist for a social purpose and are dedicated to supporting tenants’ wellbeing and financial resilience.

An eviction notice (also know as a ‘notice of seeking possession’) is typically only issued if there is no other option, for example in cases where there has been severe anti-social behaviour which is impacting the community, and even then notice is issued only after the housing association has worked with and supported the tenant(s) to resolve the issue. Housing associations have a responsibility to all their tenants, including neighbours who are affected by behaviour like this.

A tenancy may also not be sustainable where a tenant has come into severe rent arrears. But this is extremely rare and will only happen where a tenant has not engaged with the support repeatedly offered by their housing association. The message housing associations share with tenants who are struggling is always, ‘talk to us, we can help you’.

If you are a housing association tenant who is concerned about or is struggling with rent and household costs, please contact your housing association directly. A specialised, local team is in place to support you.