A social rent freeze not entirely funded by the Treasury could be self-defeating

Salford has just submitted its response to the Department for Levelling Up, Housing and Communities’ consultation on a potential cap for social housing rent rises – to be implemented next year.

Social rent increases are currently calculated at consumer price index (CPI) +1% each year – a foundational presumption that social rent providers (both housing associations and councils) will have factored into their budgeting and business plans. With inflation potentially reaching heights of 18% early next year, such a rise would be catastrophic for many social renters who are already on the breadline struggling with the cost-of-living crisis.

The consultation provides three potential scenarios: a rent cap of 3%, 5% or 7%. The Municipal Journal reports that a 5% cap is government’s “favoured” proposal – saving renters more than £2.5bn in increased rents. The move would also save the Treasury more than £5.6bn in housing benefit payments; a cynic might consider this the primary motive of government’s concern in this consultation.

Yet an unfunded cap on social rents of 5% would be utterly catastrophic for social housing providers, who have both factored in the anticipated increases to cover their costs whilst also continuing to provide a desperately needed supply of social housing to tackle the housing and homelessness crisis. In addition to these pressures, councils are also in the 12th year of government-imposed austerity – during which over 50% of budgets have been lost – and housing providers are facing huge unanticipated costs association with post-Grenfell building regulations, a new fire safety order, including a hugely expanded regulatory role for social housing providers.

In my local authority of Salford, over 6,000 households are already on our housing waiting list and many more won’t even register – with waiting times so extortionate that ‘hanging around’ to receive a home is often seen as a fool’s errand.

Without additional funding, this cap – whilst entirely necessary to avoid a wave of evictions and arrears within the social housing sector – will likely bankrupt many housing providers and entirely restrict their abilities to provide additional social housing, which is vitally required to deal with the current housing crisis.

And yet – the huge savings provided to the Treasury on housing benefit will undoubtedly provide a central motivation for them in their decision making. Particularly considering the utterly catastrophic impact of more than £43bn worth of tax cuts for the ultra rich that have recently been agreed by Kwasi Kwarteng in his ‘mini-Budget’.

Given the financial precarity faced by many tenants on social rents, to avoid a huge wave of homelessness the ideal solution to the current crisis would be a total rent freeze. Unless this freeze is entirely funded by the Treasury, however, it could prove self-defeating – cutting off the very supply of truly affordable accommodation so desperately needed to resolve our housing and homelessness crisis.