A proposed cap on social housing rents could lead to building safety works being delayed as income drops off, housing associations have warned.
The rent ceilings being proposed by the Government “will lead to difficult choices on what we can and cannot do”, according to G15, a group of leading housing associations in London.
The group warned that members’ “number one priority” is residents’ safety, but reduced income from rents would mean it will take longer to inspect buildings that have not already been assessed, and capacity to fund works each year will be reduced.
In August the Government said rent increases for people living in social homes could be capped as low as 3% during the next financial year.
It launched a consultation, due to close next week, on a proposed rent cap in a bid to protect the country’s most vulnerable households during the cost-of-living crisis.
G15 provides homes to one in 10 Londoners and 715,000 homes across the country. More than two-thirds of residents receive Universal Credit.
The issues we are looking to balance are some of the most challenging I have seen, or had to grapple with, in the 30 years I have worked in housing— Geeta Nanda, G15 chairwoman
The possibility of benefits not being uprated in line with inflation is “a massive issue for the whole social housing sector”, the group said.
It is calling for benefits to be increased and further targeted support for those who are most vulnerable to the rising cost of living.
It said capping the amount social rents can rise at 3% for one year would mean a reduction of more than £2 billion in reinvestable rental income for members over five years.
If rents were capped at 7% the impact would still be “extremely significant”, with a reduction of more than £1 billion over the same period.
These caps “will potentially see building safety works slowed down, investment in existing homes reduced, slower progress on decarbonisation, fewer new affordable homes delivered, and reduced financial capacity of organisations”.
Geeta Nanda, G15 chairwoman and chief executive of Metropolitan Thames Valley Housing, said: “The issues we are looking to balance are some of the most challenging I have seen, or had to grapple with, in the 30 years I have worked in housing.
“We are approaching this with a commitment to continuing to provide good, safe, and affordable homes that help people to live well.
“However, as anyone can see, there are real risks that need to be carefully considered, alongside ensuring residents are supported in the face of the cost-of-living challenges many face.”
She added: “It’s vital that these possible impacts are acknowledged by Government and shared with residents in the spirit of transparency.
“If no ceiling was introduced on social rents, it would be extremely unlikely that any organisation would seek to apply the maximum possible increase next year.”
Currently, social landlords can increase rents in line with the Consumer Prices Index (CPI) plus one percentage point.
The Hyde Group, a housing provider which chairs the G15 building safety group, said it has held discussions with concerned members “who fear they could have little choice but to defer building safety works if rents are capped at low levels without additional support”.
A spokesman said: “This would be a devastating blow to the very residents our members are here to support.
“At the most extreme, when coupled with other significant economic pressures, some providers could find it difficult to fund the costs of cladding replacement works that are not fully covered by the building safety fund, resulting in residents having to wait longer for their homes to be made safe.”
Mark Foxcroft, partner at Devonshires, who acts for housing associations facing building safety issues, said some providers are struggling to make ends meet and “merging with each other to survive”.
He said: “The proposed rent cap, in conjunction with the ongoing building safety crisis, could exacerbate that and see more housing associations in financial difficulty.”
Polly Neate, chief executive of Shelter, said: “Extraordinary times call for extraordinary measures.
“It is right to cap social rents, but the Government has to make sure social landlords still have the funds to ensure the homes they provide to people are safe and well maintained.”
A Department for Levelling Up, Housing and Communities spokeswoman said: “We know that families are worried about the months ahead and we are consulting on whether social housing rents should be capped next year to protect tenants from significant rent increases.
“We are working with the sector and inviting views from landlords on how best to help social housing tenants through these challenging times.”
