Rachel Reeves set to hit council tenants with lease rises
Council tenants could be hit with inflation-busting rent rises for a decade to pay for new housing – prompting fears it will only push up the benefits bill.
Ministers are considering increasing subsidised rents in social housing by more than inflation for each of the next ten years as part of plans to boost the building of affordable homes.
Chancellor Rachel Reeves is looking at introducing a new formula at the Budget that would put up rents in England by the CPI measure of inflation – currently 2.2 per cent – plus an additional 1 per cent annually, the Financial Times reported.
The policy means that if inflation spiked again over the next decade it would mean huge increases in rent for tenants – much of which would likely have to be covered by taxpayers.
Local authorities and housing associations, which receive rent from tenants in social housing, have been lobbying for a long-term settlement to give them stability as well as more money to make up for changing policies imposed in recent years which have included price caps and cuts.
Chancellor Rachel Reeves is looking at introducing a new formula at the Budget that would put up rents in England by the CPI measure of inflation
Tory MP Sir Iain Duncan Smith (pictured), a former Work and Pensions Secretary, said the ‘black hole’ is the one being created by Labour
Local authorities and housing associations, which receive rent from tenants in social housing, have been lobbying for a long-term settlement to give them stability as well as more money to make up for changing policies
The current settlement is also CPI + 1 per cent but expires in 2026.
However, senior Conservatives have warned that by piling extra costs on social housing tenants, the new Labour government will only end up increasing the already huge welfare bill.
Latest figures show the Department for Work and Pensions paid out £31.8billion in Housing Benefit and the housing element of Universal Credit, which helps pay the rent for many in social housing, last year.
Sir Simon Clarke, who served as a Conservative minister in the Treasury and housing departments, told the Mail: ‘The fundamental issue we face in our housing market is lack of supply, which is distorting house prices and rents in the private and social housing sectors alike.
‘The key to fixing this is releasing more land for new homes with greater predictability.
‘Raising rent levels can only address the symptoms rather than the root causes of this problem. Until we fix the core issue of land supply, everything else will simply see our already enormous housing benefit bill rise still further.’
Tory MP Sir Iain Duncan Smith, a former Work and Pensions Secretary, said: ‘What will happen is the Housing Benefit bill will go up and taxpayers will pick up the bill.’
He added: ‘Everything the Labour government has said so far is about spending more money, not less. The ‘black hole’ is the one being created by Labour.’
And Green Party co-leader Carla Denyer said: ‘The Chancellor’s proposal lays bare her skewed priorities – instead of making the wealthiest pay what they owe, she’s planning to hike rents for social housing tenants in the middle of a housing crisis. It’s short-sighted and cruel. We need to see government taxing wealth instead.’
But the proposal to hike rents was welcomed by the National Housing Federation, which represents housing associations.
Green Party co-leader Carla Denyer (pictured) said the Chancellor’s proposals ‘lays bare her skewed priorities’
Housing Secretary Angela Rayner said in a Commons statement last month said the Government would give councils and housing associations the rent stability they need to be able to borrow and invest in both new and existing homes
Its chief executive Kate Henderson said: ‘A combination of rent reductions and caps have meant rental income is 15 per cent lower in real terms than it was in 2015; this equated to £3billion in lost rental income for housing associations last year.
‘This has inevitably led to a reduction in plans for building new affordable and social housing at a time when they are needed more than ever.
‘We welcome the government’s commitment to set out plans at the next fiscal event to provide greater rent stability to social landlords so they can have the certainty they need to plan investment in new and existing affordable homes over the long-term whilst ensuring social rents remain affordable for residents.’
The Ministry of Housing, Communities & Local Government said: ‘Work is ongoing to fix the foundations of our housing and planning system and we will set out our plans at the next fiscal event.’
Treasury sources described the reports as ‘speculation’ and said it was too early for decisions to have been made about October’s Budget.
However Housing Secretary Angela Rayner said in a Commons statement last month: ‘We will set out plans at the next fiscal event to give councils and housing associations the rent stability they need to be able to borrow and invest in both new and existing homes, while also ensuring that there are appropriate protections for both existing and future social housing tenants.’
