Pushing for rent convergence ‘priority’ for NHF as it draws up consultation response

Making the case for the re-introduction of rent convergence is a “priority” for the National Housing Federation (NHF) as it draws up its response to a key government consultation, it has said.

The NHF, which represents housing associations in England, is calling on members to provide evidence showing the impact reintroducing the policy would have on their financial capacity.

The government is currently consulting on its future rent policy and is proposing a five-year settlement under which social landlords could raise rents by the consumer price index (CPI) measure of inflation plus 1% every year.

However, many in the social housing sector have called for ministers to go further and reintroduce rent convergence - a policy which had allowed cheaper rents to rise more quickly to ensure alignment between rents on different properties. The scrapping of the policy in 2015 has been estimated by the G15 group of housing associations in London to have cost its members £2bn.

The NHF, in a note to members yesterday, said: “The current proposals do not include any convergence mechanism to increase below-formula rents by more than CPI+1% until they are in line with the rent setting formula. This is a significant disappointment and will harm the sector’s financial capacity and ability to invest.”

It added: “Setting out the current financial position of housing associations and making the case for rent convergence is a priority for the NHF in our response to the consultation. We would therefore welcome evidence from members on the impact that rent convergence would have on your financial capacity, especially with reference to your ability to invest in new and existing homes.”

The Ministry of Housing, Communities and Local Government appears lukewarm about the idea currently. In its consultation paper last month, it admitted the move would allow providers to generate additional financial capacity. However it raised concern about the impact on the benefits bill of allowing some rents to rise at more than CPI plus 1%

It said: “Compared to limiting annual rent increases to CPI+1%, this would reduce the disposable income of tenants who are affected by rent increases and result in higher welfare spending.”

>>See also: Why convergence needs to be a part of any new social housing rent settlement

>>See also: Rent policy changes put 300,000 social homes at risk of becoming unsustainable, warns G15

Ian McDermott, chief executive of Peabody, in a piece for Housing Today last week argued convergence would in fact push down the benefits bill as it would mean more homes for low-cost rent.

“The absence of convergence prevents any rent flexibility that could be used to reduce complexity and make rents fairer for everyone in the social sector”, McDermott wrote.

The NHF also warned that the increase in National Insurance employer contributions in the Budget has ”substantially eroded the benefit of a CPI+1% settlement for many housing associations, particularly in the supported housing sector where staffing costs are high.”

The NHF is asking members to submit their comments on the rent policy to the federation by 25 November. The government consultation itself runs until 23 December.