The Rising Cost of Social Housing
Wednesday the 27th of June saw a concerning story published on BBC Wales’ website. Shelter Cymru revealed that they had been “inundated with calls from tenants” who lived in social housing reporting concerns that their rents were becoming unaffordable due to recent rent rises. This story followed closely on the heals of the publication of the Joseph Rowntree Foundation’s report “Effective housing for people on low incomes in the Welsh Valleys” which had also raised concerns about the affordability of social rent for those on the lowest incomes.
Unfortunately, these reports were not a surprise to us here at TPAS Cymru. For the past few months, rent affordability has increasingly been raised as a concern at our tenant networks and by members of our Tenant Pulse. We have passed on these concerns to the Welsh Government, the Regulatory Board for Wales and the sector more generally, most recently through the publication of our report, The Tenants Voice on Value for Money. But why has this issue become more prominent over recent months?
Rent setting policy in Wales is developed by the Welsh Government. The system currently in place allows social housing rents to increase by Consumer Price Inflation (CPI inflation) plus 1.5% every year and an additional £2 per week. In 2014, 2015 and 2016 CPI inflation was reasonably low, meaning that social housing rents in Wales did not increase significantly. Interest rates began to rise in early in 2017, however, and when the rent for 2018-19 was set, it stood at 3%. This meant that in April 2018, social landlords in Wales were permitted to raise their rents by up to 4.5% plus £2 per week. The piece published by the BBC on Wednesday revealed that at least two local authorities and eleven housing associations have increased their rent by the full 4.5% plus £2 per week, with Shelter Cymru reporting that they had been contacted by a large number of social housing tenants who had seen their rents rise by an average of £300 over the year.
With such large increases in rent, it is perhaps not surprising that organisations like Shelter Cymru and TPAS Cymru are seeing more tenants raising concerns about the cost of their social rent. Not only have rents been increasing, but welfare reform has had a direct impact on many social housing tenants. The Joseph Rowntree Foundation’s report into housing for those on low incomes in the Welsh Valleys sets out that once the current round of welfare reform has been fully implemented, working age residents in the Valleys will be £333 million worse off than 2010, or £840 per working age person. As a result of both these changes, they estimated that the social rent for a general needs 2 bed property in the Valleys was unaffordable for approximately 46% of tenants in the area.
Given all these concerns, why are social rents rising? There are a number of reasons why social landlords increase their rents. First, social landlords in Wales are playing a key role in helping the Welsh Government meet its target of constructing 20,000 affordable homes by 2021. The money social landlords raise through social housing rents plays a vital role in allowing them to construct this much needed new housing. Social landlords are also providing tenants with additional support services such training that can assist tenants to enter the work place, and advice on how to ensure that they receive all the benefit payments they're entitled to. There is a cost for offering these additional services which rent helps to fund.
There are signs that change may be on the horizon. The Welsh Government have commissioned a review into social rent levels in Wales, with the results expected by late summer/ early autumn and it is not just tenants who are likely to wish to see reform. In 2017, Community Housing Cymru, the representative body for housing associations in Wales published a note that argued that the current approach to rent setting was “not sustainable”. One of the reasons they had reached this conclusion was that “the current approach operates independently of welfare reforms and is blind to the risks they pose to affordability to tenants and the collectability of rent.”
Tenants are also increasingly interested in playing a stronger role in the process. TPAS Cymru has been contacted by a number of tenants who wanted a clearer understanding of the mechanism in place that allowed social landlords to increase their rents. Their ability to play a part in the process seems set to be strengthened with the Welsh Government expected to publish data on the performance of housing associations online. Tenants will therefore be able to compare data on their landlord with others operating in their community. One piece of data we’re expecting to be made available on this website is rent levels. This will empower tenants to question their landlord if any significant disparity was apparent between their rent and other landlords present in their area, allowing tenants to have a fuller understanding of why their landlord operates in the way that they do.
The Welsh Government commissioned review into rent setting and the Welsh Government’s review into affordable housing supply seem to provide an opportunity to debate this difficult question and to develop a sustainable, long term approach to social housing rent levels in Wales.