What is the Welsh Government’s Rent and Service Charge Standard?

Social Housing Rent and Service Charges 2023-2024 (Agenda Edition 16)

Subjects for Tenant Groups to discuss with their landlord

Some tenant groups have asked us for topical agenda items/subject briefings for their tenant group to discuss with their landlord.  TPAS Cymru have created a briefing series that we call ‘The Agenda’ which provides tenant groups with an overview of a subject and suggestions of questions you might want to ask in your engagement with your landlord.

What is the Welsh Government’s Rent and Service Charge Standard?

Social Landlords* in Wales need to set their rent charges on an annual basis for the financial year (April to March). They must set their rent and service charges in accordance with rules and guidance set out in Welsh Government’s Standard for Social Housing Rents and Service Charges (Rent and Service Charge Standard 2020 - 2025).

The Rent and Service Charge Standard was agreed to recognise that having a long-term agreement on how social rents and service charges can be set each year, will provide certainty to tenants about rent levels, and also to social landlords to support the financial borrowing they require to help deliver more affordable homes.

*The rent standard is for social landlords with general needs and sheltered housing. It does not apply to:

  • Extra care housing
  • supported housing
  • any housing which is not self-contained
  • housing let at intermediate or market rent levels
  • other specialised housing

What are the main Rules in the Welsh Government’s Rent and Service Charge Standard?

Under the five-year Rent and Service Charge Standard, which came into effect from April 2020 there are several rules which landlords need to comply with when setting rents and service charges. Many of the rules are based on the Consumer Price Index (CPI)*

*The CPI is published by the Office for National Statistics. It measures the average change from month to month in the prices of goods and services purchased by most households in the UK. The government uses the CPI as the basis for its inflation target and for uprating of state pensions and state benefits.

In previous years CPI+1% was the maximum overall rent increase allowable in any one year - but CPI+1% wasn’t to be regarded as an automatic uplift to be applied by social landlords.

The Rent Standard also stated that “Should CPI fall outside the range of “0% to 3%, the responsibility will rest with the Welsh Ministers to determine the appropriate uplift to be applied for that year.”

Due to the increasing level of inflation in the UK in 2022, the September CPI index was 10.1%, which is beyond the CPI range that the standard works within (CPI+1). This meant that the Welsh Government Minister had to make a decision on the maximum overall rent increase allowable for 2023-24.

From April 2023, the maximum limit (cap) which social rents can charge will be 6.5% - an increase well below the rate of inflation. This is the maximum any landlord can charge across all of their properties. 

No landlord is required to charge the maximum and all landlords will be expected to carefully consider affordability and set rents as appropriate across their housing stock.

Within the overall settlement landlords may freeze, lower or raise individual rents based on a number of local factors of which affordability is a key consideration. The rate is a maximum, not a requirement or a target.

The following rent setting rules will apply for the 2023-24 only:

The Minister has determined that:

  1. The total maximum annual rent uplift for 2023/24 across the whole of your stock (as of 31 March 2023) will be up to 6.5%.
  2. Whilst 6.5% will be the maximum increase allowable, it must not be regarded as the default increase. Landlords’ decisions on rent must consider the affordability of rents for tenants.
  3. The level of an individual property rent can be reduced, frozen or can rise by up to an additional £2 per week over and above 6.5%, on condition that the total rental income collectable across the whole stock increases by no more than 6.5%. This provision is designed to enable social landlords to restructure rents where appropriate. In effect, if you decide an individual rent(s) should increase by up to £2.00 per week on top of 6.5%, other rent(s) will need to be frozen or reduced to ensure the overall increase for the whole stock does not exceed 6.5%.
  4. Social landlords should advise the Welsh Government if they have concerns about the impact that the rent standard has upon their business plan, financial viability or on their ability to meet their obligations to tenants and lenders.
  5. As an intrinsic part of the five-year rent standard, social landlords are expected to set a rent and service charge policy which ensures that social housing is and remains affordable for current and future tenants. As part of the annual decision on the level of rent uplift/reduction to be applied, social landlords must assess cost efficiencies across the operating cost base and value for money as well as affordability for tenants.

When making the decision on rents for 2023-24, the Welsh Government Minister also secured a series of commitments from social landlords in Wales to support tenants experiencing severe financial hardship as a result of the cost-of-living crisis.

These new agreements are set out below and those from previous years are updated where they have not been superseded:

  • No evictions due to financial hardship for the term of the settlement, (financial year 2023/24), where tenants engage with landlords.
  • Continue to provide targeted support to those experiencing financial hardship to access support.
  • Maximise the use of all suitable social housing stock, with a focus on helping those in the poorest quality transitional accommodation move into longer term homes that meet their needs.
  • Undertake a joint campaign to encourage tenants to talk to their landlord if they are experiencing financial difficulties and access support available.
  • Build on existing engagement with tenants in rent setting decisions, including explaining how income from rent is invested and spent.
  • A commitment to invest in existing homes to keep them safe, warm and affordable to live in.
  • Explore, in partnership with Welsh Government, options to prevent home loss for owner occupiers and those in the private rented sector.
  • Work in partnership with tenants, Welsh Government, funders and other partners to develop a consistent approach to assessing affordability across the social housing sector in Wales.
  • Participate in an assurance exercise in early in the 23/4 financial year to reflect on application of the rent standard to date. This will build on the work undertaken by social landlords over the past 3 years and inform future work to develop a consistent approach to assessing affordability.

Existing agreements carried forward:

  • Continue to strengthen approaches designed to ensure you minimise all evictions and work effectively with partners to deliver on the commitment not to evict into homelessness.
  • Undertake a standardised tenant satisfaction survey and provide the data for publication on a central website to assist tenants in scrutinising and comparing landlord performance.

What about affordability?

Affordability is at the heart of the standard and there are clear expectations of Housing Association/RSL Boards and Local Authority members to show how they would deal with the impact of rent and service charges changes on their tenants’ incomes.

Social landlords will have to demonstrate how they are mitigating and managing risks to tenants’ income, and these will be closely monitored by officials.

What else do social landlords need to do under the standard?

Service charges need to be listed separately to Rent charges so that tenants can see clearly what services they are paying for.

Monitoring Compliance - All social landlords are required to make, and evidence, an annual assessment of affordability for tenants, cost efficiencies and to demonstrate how their homes and services represent value for money as part of their decision on the rent uplift to be applied each year.

Social landlords should remember the rent standard is the maximum increase which can be applied. It is not a target rent. To assist with providing the necessary assurance, each social landlord will be required to complete a self-certification monitoring form which will be used to monitor compliance with the Welsh Government Rent Standard

Further information is available here:   Package of support promised for tenants as Minister sets new social rent cap for Wales | GOV.WALES

What have tenants told TPAS Cymru about the social landlords rent agreement for 2023-34?

For context, the rent agreement announcement came during the TPAS Cymru 2022 Annual Conference. We held a special session at the end of the conference day to tell tenants the news and to get initial reactions on the announcement of 6.5%.

For some this was first they had heard of the announcement, and they just absorbed the news. It is also worth noting regarding the below feedback– this feedback was collected at a conference during the workday, in mid Wales. The audience was older than the general tenant population, so this is reflected in the comments. 

Tenant feedback on the social landlords rent agreement for 2023/24.

  1. It was higher than expected and there was a general feeling of disappointment from tenants. There was a lot of understanding regarding the trade-off between rent and services and trying to get that right, but it was higher than they thought it would be (There was a comment from a tenant saying ‘CHC got what they wanted as usual’)
  2. The first comments in our session expressed more concern regarding service charges as they could be increased by a much higher %. They felt service charges were out of control and unregulated and are unaffordable for tenants, especially during a cost-of-living crisis.
  3. Some pensioners didn’t agree with narrative of they would be covered under pension rise. They pointed out lots of other costs were going up and it would cause they stress trying to juggle this cost-of-living crisis.
  4. Staff in the room had read the statements from sector bodies that 7% was a cut in services and were concerned about where those cuts would land (as they were at TPAS conference they were typically in roles of tenant participation, communications, community workers etc. and worried they could be cut or that this would affect their services.) 
  5. There was confusion as to how landlords would interpret this settlement – Tenants asked if landlords would raise by 6.5% across the board, will they use an affordability model etc.
  6. Later as Twitter absorbed the news, concern raised about shared ownership.

Over the rest of the conference, TPAS Cymru  pressed the theme that Landlords need to engage and discuss with tenants as to what this announcement means for them.

For example, on topics such as:

  • Explaining any modelling used (For example, JRF)
  • If there will be any cuts to services or provision and where?  

What support is available, and will it be communicated to tenants?

Examples of questions to ask your landlord:

  1. How and when will consultation with tenants on Rent and Service Charges take place?
  2. What are the plans to let tenants know about the consultation and how they can have their say?
  3. What assessment of cost efficiencies of you as a landlord will be carried out as part of the Rent Setting process?
  4. How will tenants be made aware of changes to rents and services?  How will this information be accessible for all tenants?
  5. What plans are in place to support tenants who are struggling to pay their rent?

We hope you have enjoyed reading this edition of the Agenda. We would love to hear about any conversations you’ve had with your landlord regarding this topic, so please email [email protected] with any feedback or further questions.