Social housing rent setting policy

The Social Housing Reform Programme (SHRP) is turning its attention to rent setting. Rent policy alignment focuses on the need to develop a fairer system of affordable rents in the social housing sector.  As a pre-consultation exercise, DSD recently attended our Housing Advice Practitioners’ Forum to present their early thoughts on social rent policy. There was a broad consensus among stakeholders that there should be fairness and consistency in the rent setting policy for all social rents.

Principles of rent policy

The stated principles of the policy are to promote:

• Fairness
• Affordability
• Sustainability
• Transparency

The Department for Social Development (DSD) outlined key drivers for a rent setting policy to ensure that

• social rents are fair and affordable for tenants and that
• rental income is sufficient to maintain homes to a good standard

Significant differential between NIHE and housing association rents

The Minister for Social Development is responsible for setting the level of rent the NIHE charges its tenants whilst housing associations set their own rent levels. Historically, housing association rents tend to be substantially higher than those for Housing Executive tenancies, with Housing Executive rents seen to be artificially low. The average weekly rent for a 3 bedroom NIHE property is £70 while the average weekly rent for a 3 bedroom housing association property is £90.

Rent increases over last 10 years

The differences in rental increases between NIHE and housing association properties have varied greatly for the period 2003/04 to 2012/13. Housing Executive rents increased by 37% and housing association rents increased by 62% during the same period. 

Impact of low NIHE rents

Housing association properties often tend to be newer and of better quality than Housing Executive properties. Research carried out by Savills in 2009 identified a total cost of £5.1 billion to maintain all NIHE properties to the Decent Homes Standard over the next 30 years. However, the Department has suggested the initial findings of a recent survey estimate the figure is nearer to £6.7 billion. DSD reiterated the key points made by the Savills Stock Condition Survey (2009), that without extra revenue, the NIHE stock will fall further behind as there is insufficient income to meet requirements for further investment.

However, this aspect came under scrutiny when key stakeholders expressed concern that no assurance was provided that any extra income generated through the rental increase will go towards the maintenance and investment in the stock which undermines one of the key drivers of this policy. Members of the Social Development Committee also asked for assurances that any increase in rent would be reflected in improvements to the property during the committee briefing on this policy.

Housing Practitioners’ Forum concerns

Members of the forum asked DSD to further consider a number of issues, namely

• how tenants would be involved in the consultation
• ensuring that affordability is a prime consideration in how the policy is implemented
• committing to a fairer social rental system by fairly addressing the disparity in social rents
• ensuring transparency in how service charges are calculated and applied
• gradually phasing in any rent increases
• considering the role of the regulator and the viability of an independent regulator
• how the 23% of tenants who pay full rent will cope with the demand and whether an equality impact assessment will be carried out.

Social Development committee briefing

DSD officials briefed the Committee on the 18th June on their draft proposals for a social rent setting policy. They outlined 7 key elements:

• Every social landlord must have a rent policy and this requires engagement with tenants
• There will be more transparency around service charges and how they are applied
• A new benchmark rent determined by what is considered an affordable rent (Based on 14/15 prices this would be an increase of 27 pence per week)
• Every social landlord must have regard to the benchmark rent`
• The regulator will monitor social rents under the Consumer and Financial Standards
• The benchmark must be updated each year with an annual increase of CPI + 1.5%
• NIHE rents should gradually rise with convergence to reach the benchmark rent

Housing Rights’ view

Housing Rights supports the need for a fair rent policy for social housing in Northern Ireland. However, as previously highlighted there are major concerns around affordability and, in particular, the impact of any increase on the 23% of social housing tenants who receive no help with their housing costs.

At a recent event in Belfast, the Money Advice Service stated that 29% of respondents to their debt survey in Northern Ireland had identified rent arrears as a problem.  The corresponding figure for Great Britain is 19%.  This figure of 29% covers people who believe that their rent creates a heavy financial burden or who had missed 3 of their last 6 monthly rent payments.  The majority of respondents, 62%, were families rather than single people.

We look forward to engaging in the formal consultation process which is expected in August and will last for 16 weeks.

Housing Rights Training

Sustaining Tenancies - keeping clients in their homes on the 21 April looks at practical solutions to key issues that can impact peoples’ ability to stay in and enjoy their homes.