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General needs rents will exceed the benefit cap in 110 local authorities within a decade, research shows

By 16/09/2020No Comments

General needs rents will exceed the benefit cap for those out of work in 110 local authorities by 2030 if rents continue to rise at the Consumer Price Index (CPI) plus one per cent, impacting providers’ financial strategy, according to Savills research.

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Picture: Getty

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Assuming the benefit cap remains at current levels, rent in areas around London will become unaffordable for those out of work within five years #SocialHousingFinance


“Rent rises of CPI +1% may not be sustainable for long across many parts of the country,” Savills report finds #SocialHousingFinance


Assuming the benefit cap remains at current levels, as it has done since 2016, areas around London will show the greatest strain, and for many local authorities in the South East, general needs rents will be pushing against the benefit cap within five years.

The new Rent Standard came into force in April, ending four years of rent cuts for general needs affordable housing and allowing registered providers to implement rent rises, set at a maximum of CPI plus one per cent per year for the first time since 2015/16.

According to an earlier Savills Housing Sector Survey 2020, 54% of housing associations are planning to increase all rents by CPI plus one per cent in the next 12 months, while 41% will consider rent increases having regard to the tenants’ ability to pay.

The company’s most recent research, which is being launched today at Social Housing’s Finance Conference, found that until 2030, pressure on the benefit cap remains concentrated in the South. After 2030, general needs rents start to exceed the cap across the rest of the country.

“Increasing general needs rents will therefore start to have an influence on registered providers’ financial and operational strategy, especially in the Home Counties,” Savills’ report said.

“Providers will want to ensure tenants are in work to avoid hitting up against the benefit cap.”

It pointed to the Love London Working partnership, through which 13 housing associations and the Greater London Authority have tried to help those in long-term unemployment to move into work.

“This kind of activity will need to become more widespread in order to help social housing tenants to afford their rents as they increase,” Savills said.

The research also found that assuming rents continue to rise at CPI plus one per cent, the average general needs rent will have overtaken the average market rent in 23 local authorities by 2030.

It modelled regulated rents growing at CPI plus one per cent and market rents growing in line with gross value added, as a proxy for wages, to understand how long it might be before the average general needs rent overtakes the average market rent.

“Rent rises of CPI plus one per cent therefore may not be sustainable for long across many parts of the country,” it said.

It pointed out that turnover of social housing stock is higher in the districts where market rents and general needs rents are the most similar, and so voids may increase as the gap reduces, unless landlords moderate rent increases in areas of greater rent competition.

Its analysis found this will happen in three local authorities by 2025, 23 local authorities by 2030, and 181 by 2040.

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