As millions choose between heating and eating, the time for a rent freeze is now

Whilst there has been much talk about the ‘cost-of-living crisis’ one of its key components, rent, has yet to be given the attention its deserves. In the ‘social housing’ sector, as a result of the government’s rent formula of Consumer Price Index (CPI) plus 1%, four million council and housing association households are facing the threat of a double-digit rent rise next April. The annual rent increase is based on the September CPI inflation rate. With inflation already at 9.4%, the increase could be 10% or more.

Such a rent rise would have a huge impact on tenants who do not have their rent paid by housing benefit. In the three years to April 2021, council tenant rent arrears for England increased by 34% to £317m. With another increase in energy prices due in October and another in January, a rent rise of 10% or more would inevitably increase the number of tenants facing a choice between ‘eating or heating’.

That is one of the factors behind the emergence of damp and mould (as well as negligent landlords). A recent survey by Nationwide showed that 17% of respondents faced a decision to ‘heat or eat’, 8% had turned off their heating entirely because they couldn’t afford it and a third were only turning their heating on for a few hours a day – this was not a survey of social renters exclusively but it gives an indication of the scale of the problem.

Landlords do not have to increase their rent by CPI plus 1%. The formula is a ‘ceiling’. Some landlords apply the maximum as a matter of course, yet the only obligation on councils and housing associations is that they cannot raise the rent above CPI plus 1%. Landlords are “free to apply a lower increase, or to freeze or reduce rents, if they wish to do so”. Recent research by Inside Housing on this year’s rent increase, with a ceiling of 4.1%, showed that a large majority of landlords increased the rent to the maximum. About nine councils, however, increased it by the inflation level of 3.1% or less, with two actually freezing the rent.

Rent freeze?

Faced with this dire situation, the Labour Campaign for Council Housing has proposed a coalition of organisations to campaign for a rent freeze. The objection raised will be that councils and housing associations cannot afford to do this.

Since housing revenue accounts (HRAs) are ‘ring-fenced’ – meaning that councils cannot use ‘general fund’ money to fund them – and unsubsidised, their income overwhelmingly comprises tenants’ rent and service charges. More than 92%. So what councils can spend is almost entirely dependent on their rental income. In addition, the problem that councils face is that HRAs are underfunded because of the 2012 ‘debt settlement’, when £13bn extra ‘debt’ was imposed on councils. The introduction of the ‘enhanced’ Right to Buy (increased discount) produced a fourfold increase in sales. Hence far more rent was lost than was incorporated into council 30-year business plans.

So, underfunding of HRAs is a genuine problem. That’s why for council housing, in calling for a rent freeze, we would add the caveat that the government should fund a freeze. That would cost them in the region of £730m for England, which is not a huge sum when you consider that the government is gifting second home owners £620m to help them out with their heating bills.

Dilemma

Labour councils that still have council housing are now faced with the question of whether or not they implement steep rent increases in line with inflation in a situation where the largely poor tenants, whose rent is not covered by housing benefit, are struggling to get by month by month. It is true that they face a dilemma because without increasing rent their income will be able to fund less maintenance and renewal work in coming years. This dilemma is obviously irresolvable at the local level. But the underfunding of HRAs cannot be resolved by increasing tenants rents above inflation. It requires campaigning to have them adequately funded and for the government to fund a rent freeze to stop further impoverishment of tenants.

Housing associations

According to the the Global Accounts of Private Registered Providers produced by the Regulator of Social Housing, rent arrears for housing associations in 2020/21 were at £705m, or 5% of the rent roll. This would mean rental income of around £14.1bn. Multiply the income by the 1.5% increase last year and the 4.1% increase this year and that comes out at £14.898bn. If we assume a 10% increase next year, then a rent freeze would cost housing associations around £1.48bn.

It might be less, of course, because even some housing association may think twice about the impact of such a rise on their tenants and rent arrears. Could they cope with a freeze? According to the Global Accounts, they have reserves of £57.4bn. They also made £1.3bn profit on sales last year. The situation will vary considerably, obviously – there are 1,400 housing associations in England, some very large, some very small. Certainly the more commercial, larger companies could afford it. The government could fund a freeze for the smaller ones if there is evidence that they would struggle to cope with one.

The private sector

Profiteering in the private-rented sector (PRS) has seen increases of 10% or higher over the last year. It has long been a seller’s market with landlords taking advantage of a surfeit of would be renters and a shortage of properties – in large part the result of a Right to Buy-driven shortage of council housing. Taking advantage of this shortage, private landlords have driven up rents way above inflation and wages increases.

The worst housing conditions are often in the PRS. Nearly a quarter of the stock predates 1919. The English Housing Survey estimated last year that 23% of homes did not meet the ‘Decent Home Standard’ – which is 1.1 million homes. We cannot ignore the four million tenants in the private sector. Campaigning for a rent freeze can unite private renters with council and housing association tenants.

Coalition

Whether the government does anything in relation to rents is dependent on if there is a significant movement of tenants and others to put them under pressure. Those who are directly affected have most interest in opposing their own impoverishment. Trades unions have an interest, as well, because some of their members are tenants and the current wave of industrial action is the direct result of the cost-of-living crisis and a decade of austerity.

There are more than eight million tenants in the three rental sectors today. If organised, they could have a lot of clout. It was campaigning by the growing tenants’ unions and housing campaigns that forced the hand of the government in relation to section 21 evictions (even though ministers prevaricated). The key to building pressure today also lies in campaigning and growing the tenants movement. It is the job of the affiliated unions to pressure the Labour Party and Labour councils to take the side of tenants and put the government under pressure.

A number of organisations such as the Greater Manchester Tenants Union, the Labour Homelessness Campaign, Defend Council Housing and Homes4All have responded positively to our proposal. If your organisation would like to help to campaign for a rent freeze, email us at labourcouncilhousingcampaign@gmail.com and check out our website.

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