30th October 2019
At their next meeting, our Board need to make a decision about what increase to apply to rents next year. We are recommending a 2.7% increase, equivalent to the Government’s expectation for housing associations. We think this is the minimum required to keep the business running and meet tenants’ priorities. Our Board are keen to hear what tenants think so they have a clearer picture before considering our recommendation.
This month, we are getting in touch with our tenants in lots of different ways to ask the question – what do you think about a rent increase in April 2020?
How rents are calculated
Before you answer that question, we would like to try and explain a little more about how rents are calculated and what has been happening with rents in the last few years.
As a housing association we can’t just choose to charge what we like. The formula for calculating rents is set by the Government, and they tell us what we can charge (Links to Government Documents: Rent Standard: https://tinyurl.com/y54x3awv Rent Standard Guidance: https://tinyurl.com/ybp24bxu MHCLG Policy Statement: https://tinyurl.com/y56sumrv)
Most commonly, rents have increased every year with increases in charges usually being calculated using the Consumer Price Index (CPI) or the Retail Price Index (RPI) which are common measures of inflation in the UK.
In 2013 the Government announced that in each of the following ten years, we could increase rents by CPI plus 1%. Then in 2015, for the first time ever, the Government made a surprise announcement that we must apply a 1% decrease in each of the following four years instead.
As an example, the table below shows the impact of these calculation changes, starting with rent of £100 per week in 2013, and assuming CPI of 2%:
The impact of rent changes since 2016
The Government sets standards for how we provide services to our tenants. One of many tests they use to make sure we are doing things responsibly is to check every year that we will have the resources to do everything properly for the next 30 years. We have to have a financial plan that will pay for everything we need for the next 30 years – so all the repairs, all the improvements like new roofs and kitchens etc, and that we have money to build new homes for tenants too.
The rent decrease since April 2016 has given us £2.6million less to spend in the last four years, and over the 30 years it has taken £28million out of the pot we expected to have.
Because of these reductions in the money we have available, we have had to cut our staff bill (we lost 18% of our staff in 2016) and we have had to slow down the pace that we usually make improvements to your homes.
The awful Grenfell Tower fire in 2017 has rightly made sure that there is lots of focus on making sure properties are safe – and that has brought new costs too for things like new fire doors etc. We still have to buy goods and specialist services to provide services to you. The price of materials, equipment and contractors charges have continued to increase with inflation even though we have less money available. Like all housing associations, we have had to make less money stretch further than we have had to before.
It has been challenging at times to provide the same quality of service that we used to provide. Before the rent decrease, we used to put new kitchens and bathrooms in sooner than the Decent Homes Standard set by the Government. Since the rent cut, we are making these improvements in the longer timescales the Government set out.
We know these changes have sometimes led to increased dissatisfaction, but we also know that despite that, most of the tenants that we ask agree that they would still recommend us to their family or friends. We also know that our tenants value the ‘home for life’ we provide rather than a short six month tenancy, and that our rents are considerably lower than average rents in the private sector around us.
What will happen in April 2020?
The Government have told us that we can start to increase rents again from April next year. We can increase rents by the rate of CPI in September 2019, plus 1%. September CPI rate was 1.7%, meaning that our proposed rent increase from April will be 2.7%.
This table shows what that means for a range of example rents:
This rent increase will provide more money to allow us to deliver more services and more improvements again – though we won’t be able to catch up on everything in the first year.
Our Board are keen to hear what you think about the proposed 2.7% rent increase. Please do get in touch before 11 November by emailing RentConsultation@edenha.org.uk or giving us a call on 01768 861400.
(Note all tenants will receive your personalised rent increase letter by early March 2020)