General needs rents will exceed the benefit cap for those out of work in 110 local authorities by 2030.
That’s according to Savills, whose research has warned that if housing providers continue to increase rents at the new Rent Standard of CPI+1% each year, over the longer term, affordability will become more stretched and benefit caps will be breached.
Further, the research found that a consistent annual increase at CPI + 1% could see a widespread proliferation of general needs rent overtaking market rent in terms of average cost.
Savills’ analysis predicts this will happen in a total of three local authorities by 2025, 23 local authorities by 2030, and 181 local authorities by 2040.
The new Rent Standard
The implementation of the new Rent Standard marked the end of four years’ worth of rent cuts for general needs affordable housing.
The standard came into effect in April this year, at the height of the COVID-19 pandemic, and allows registered providers to increase rents by CPI + 1% per year.
Yet the benefit cap – a limit on the amount of benefits a person can claim – is still fixed in place, and has been since its full rollout in 2013.
Around 150,000 households hit the benefit cap in May, a 93% increase in the c.80,000 households who hit the cap in February.
The largest percentage increases in total claimants between February and May were in and around the South East and the Midlands, with counts in some districts rising over 15% – albeit from low levels.
Those who have hit the cap include the 14% of social housing tenants who have children, are on housing benefit, and are unemployed.
Savills said it expects registered providers to increase rents by the maximum amount.
According to the Savills Housing Sector Survey2020, 54% of housing associations will increase all rents by CPI +1% over the next 12 months, while 41% will consider rent increases having regard to the tenant’s ability to pay.
The survey found that rent rises will help give providers financial capacity to fund the development of new homes, to improve existing stock, and to meet energy efficiency requirements.
To prevent residents hitting the benefit cap, Savills’ research predicts that registered providers will shift their focus to ensuring tenants are in employment.
The report highlights one London initiative called Love London Working, a partnership of 13 housing associations managed by the GLA.
The programme launched in 2016 with the aim of helping people who have been in long-term unemployment and exhibited economic inactivity into work.
The initiative has so far supported over 5,500 into employment from 2016.
Savills said that this kind of activity will need to become more widespread in order to help social housing tenants to afford rents as they rise.
Commenting on the report, Abigail Davies, a director at Savills Affordable Housing Consultancy, said: “This research highlights the need for housing providers to give careful thought to the long-term rental growth assumptions in their business and strategic planning.
“Market trajectories and landlord ambitions for social outcomes are important factors for consideration, alongside the policy risk that naturally arises from operating in a regulated rent environment.
“Understanding affordability to customers and positioning in the wider market is becoming increasingly important.”
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