Homelessness charity Crisis welcomed the certainty the 10-year rent settlement provides but also called for safeguards to “shield tenants from rent hikes, and prevent people being forced into homelessness”.
Joseph Rowntree Foundation’s senior economist, Rachelle Earwaker, also raised concerns about households’ ability to keep up with rents.
The English Housing Survey recently showed around 1.3 million social renting househilds were spending more than 30% of their household income on housing costs last year.
“In constrained times, the government has to balance the ability to build new social homes with social rents that families can afford,” said Earwaker. “Getting this balance right is crucial if we’re to make any progress on building the necessary social homes to end our housing crisis. If we don’t, we’ll continue to see record numbers of children living in temporary accommodation because the right homes aren’t available.
“Restricting the social security benefits families receive, through policies like the benefit cap or because they have a spare bedroom, leaves them unable to pay their rent. Our social security system must cover rents for those on the lowest incomes and secure, affordable homes should be available for those that need them.”
Mikey Erhardt, a campaigner at Disability Rights UK, insisted rising rents could disproportionately hit disabled people, stressing that a quarter of disabled people live in social housing with more than half of social rented households having a disabled household member.
“No other group of people is as reliant on the social housing sector as disabled people,” he said. “Across all tenure types, we experience inaccessible homes, huge levels of disrepair,hazardous homes and poor behaviour from landlords.
“If social housing rents are to be increased, then our new government’s first big decisions on housing, see them continuing the policies of the previous administration: making our living standards and living situations worse.”
SHAC’s Muna warned that rising rents could lead to bigger housing benefit bills for the government, especially if inflation rises again.
Previously, the government intervened in 2023-24 when inflation peaked to cap rent rises at 7% rather than the 11.1% dictated by the formula.
SHAC’s Muna added: “For a government that claims to be concerned with making sure that the public purse strings are kept tightly controlled, Reeves has just promised a transfer of yet more taxpayers’ money to private landlords – which is what housing associations are – without being able to quantify what this will cost us.
“If the Labour government insists on backing the interests of landlords, it’s not going to be long before a very deep disillusionment sets in as people realise that they haven’t really voted for a change in government, just a different set of faces pursuing the same policies that have brought us the housing crisis. This, combined with an ever-bigger impoverished class of people is a recipe for disaster.”
What does rising social rents mean for housing associations and local councils?
Reeves’ action comes as Labour has promised to prioritise social rents in a bid to build 1.5 million homes over the next five years with local authorities facing mandatory housebuilding targets to deliver 370,000 homes per year.
The Labour government inherited a housing crisis with homelessness rising to record levels, councils facing huge temporary accommodation bills and predictions that housebuilding is set to slump in the months ahead.
A failure to build enough social housing plus the loss of stock through the Right to Buy scheme has seen stock plummet, driving low-income families into the more expensive and insecure private rented sector.
Experts from Shelter have said around 90,000 social rent homes are needed every year for the next decade to tackle the housing crisis and bring down sky-high private rents.
Government figures revealed just 4,346 homes for social rent were completed in England in 2023-24, albeit a 17% increase on the 3,730 recorded in the previous year.
Housing associations have called for a long-term rent settlement to give them the certainty to commit to building more social homes, especially after rising interest rates and construction costs have led to uncertainty in the housing market.
Andy Hulme, the chief executive of The Hyde Group, said: “A 10-year, index-linked rent settlement would give social housing charities the certainty we need to invest in the homes we provide and to continue playing our vital role in building new affordable homes. It would play a critical role in attracting additional private sector investment to build more homes.
“However, we’ve been let down over promises of a long-term settlement before, so the sector will be keen to secure assurances from the new government of how this commitment will be honoured when it announces its plans.”
Analysis by the G15 has shown large London housing associations alone have had to absorb £19bn in lost rental income due to social rent caps.
Fiona Fletcher-Smith, chair of the group of leading London housing associations, said: “This policy could significantly enhance the delivery of new affordable homes in London and across the UK. Although it is yet to be confirmed, it represents a crucial first step towards providing the stability and financial certainty that not-for-profit housing associations need.
“The G15 has long advocated for a rent settlement, and we look forward to working with the government on additional measures, such as rent convergence, to unlock even more housing opportunities. If the government commits to the reported 10-year plan for rent settlement, it could be transformative for our sector, but it must be part of a broader strategy to address the social housing crisis.”
Labour has warned of a £20bn financial black hole and Dr Tom Kerridge, policy and research manager at Centrepoint said the news is welcome for local councils facing a £2.2bn funding shortfall in housing budgets by 2028.
“We welcome more financial incentives aimed at dramatically boosting the building of social housing,” said Dr Kerridge. “It’s vital, however, that any rent increases are reflected in extra support for those receiving benefits, especially at times when inflation is particularly high.”
A Ministry of Housing, Communities and Local Government spokesperson told the FT: “Work is ongoing to fix the foundations of our housing and planning system.”
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