Managing rents for now and the future

Helping the NHF balance the needs of current tenants and maintain affordable homes.

The recent leaps in inflation created huge challenges in the social rented housing sector. Nowhere more so than for shared owners in 200,000 homes part owned with housing associations, whose rents are linked to inflation, which by the end of 2022 was over 11%. On the one hand, government was keen to protect all social housing tenants facing very high, one-off rent increases. On the other, housing associations could see their ability to maintain homes for future tenants badly affected if rental income dropped too low.

Anthony Collins supported the National Housing Federation (NHF) to find a way to balance the needs of current tenants with those of future generations.

Rent cap a threat to financial viability

In August 2022, the Government published a consultation paper to cap housing association 2023 rent increases to 5%. Their own assessment was this would reduce housing association income by £4.9bn over three years for 2.8m homes. For many housing associations, this represented a serious threat to their future financial viability.

And that was before September’s mini-budget which only exacerbated the situation.

While no one wanted to put further pressure on households already struggling with the cost-of-living crisis, having no money to invest in housing would put the burden of high energy costs on future tenants further down the line.

A flexible approach protected current and future tenants

Our advice to the NHF identified how housing associations could make a ‘voluntary offer’ to government to cap rent increases at 7% for 200,000 shared owners across the country. At the same time, the government took a similar approach to cap social housing rents at 7%, rather than 5%, which improved the situation by £1.7bn for housing associations nationally.

This compromise struck a balance between protecting existing tenants and leaseholders from very high, one-off rent increases in 2023 and enabling future investment to help tenants to have warm, safe and affordable homes in the future.

“This really was a team effort. Our advice had implications on long-term funding and banking arrangements, vires and charitability, lease variations, estoppel and regulatory guidance. So, as well as our housing management team, we drew on expertise from our funding, property, corporate litigation and governance teams to help make a difference.”
Peter Hubbard, senior partner, Anthony Collins