Rental bill warning as costs to rise for 4million households by more than inflation for next 10 years under Labour plans

MILLIONS of social housing tenants face 10 years of inflation-busting rent hikes.

In a bid to address the housing crisis and boost the construction of affordable homes, the Chancellor is poised to raise social rents. 

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You live in social housing if your landlord is a council or housing association[/caption]

This comes after the previous Conservative government capped social rent hikes to 7% earlier this year.

However, Rachel Reeves has plans to introduce a 10-year formula in October’s Budget that will increase annual rents in England by the CPI measure of inflation plus an additional 1%, the FT reports.

This move aims to provide financial stability to housing associations and councils, enabling them to tackle debt and maintenance issues while encouraging the building of new social housing.

Local authorities have significantly reduced their home-building activities in recent years, leaving housing associations and non-profit organisations to take on the bulk of new social housing projects in the UK.

The government sets rent levels for subsidised social housing using a national formula, but this has frequently changed in the past.

It’s understood that the Labour government is now poised to use one formula for over a decade, guaranteeing annual rent hikes for council house tenants.

While housing associations are likely to welcome this move, it could worsen the cost of living for millions of tenants and potentially increase the government’s benefits bill. 

James Prestwich, director of policy and external affairs at the Chartered Institute of Housing (CIH), stated, “It is clear that ministers and officials understand a rent settlement needs to provide certainty to landlords and investors, enabling housing providers to plan investment in social homes over the long term.

“Of course, this must also be balanced by the need for social rents to remain affordable for people living in social housing.”

However, Polly Neate, chief executive of Shelter, added: “As inflation can spiral out of control very quickly, there needs to be mechanisms in place to protect tenants from extreme rent rises that put them at risk of becoming homeless.”

MILLIONS WILL BE AFFECTED

You live in social housing if your landlord is a council or housing association.

Most social housing tenants receive full housing benefits from the government, meaning taxpayers often fund any social rent increases.

However, around 30% of social tenants pay full rent and will be hit by future increases in full because they’re not eligible for support.

There are around four million households currently living in rented social housing.

That means 1.2million households will face future bill hikes if the Labour government confirms the new 10-year formula.

However, the exact amount your rent will increase will depend on where you live and how big your property is.

A spokesperson from the Ministry of Housing, Communities and 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.”

PAST RENT HIKES

The previous Conservative government made similar promises of long-term rent hike formulas in the early 2010s but often failed to follow through.

For example, David Cameron‘s coalition set a 10-year rent settlement in 2012 based on the retail price index plus 0.5%.

However, then-Chancellor George Osborne later imposed four years of below-inflation increases to reduce housing benefit costs.

More recently, the Conservative government announced a five-year settlement of CPI plus 1% in 2020 but had to cap rent increases at 7% due to a surge in inflation.

In the meantime, households will need to wait until October 30 when Rachel Reeves delivers her Autumn Budget to find out exactly how social rent hikes will be determined from next year.

What help is available?

If you rent from the council or a housing association, you can get help if you’re having problems affording your rent.

If you miss a rent payment, you’ll fall into ‘arrears’ and owe your council or housing associations.

Fail to pay back what you owe and you could be evicted.

If you can’t afford your next rent payment, you should talk to your landlord as soon as possible.

Call them and explain why you’re struggling.

Your landlord may be able to grant a temporary payment holiday or signpost you to other forms of help.

It’s worth asking if you can get a discretionary housing payment.

This provides extra money from your local council to help pay your rent – you don’t need to pay it back. 

It’s always worth checking if you’re getting any benefit payments you’re entitled to.

You can use several free calculators, such as Gov.uk, Citizen’s Advice, MoneySavingExpert, StepChange, and Turn2Us, to help you get an estimate.