Rent cap on social housing – is the PRS next?

Rent cap on social housing – is the PRS next?

9:58 AM, 31st August 2022, About a month ago 5

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The government has unveiled a consultation to impose a rent cap on social housing next year – at below the rate of inflation.

The move is aimed at helping tenants with the cost-of-living crisis.

However, with PRS rents rising quickly and tenants’ budgets coming under strain, many landlords will be asking if the private rental sector will follow suit.

‘Concerned about a cap being proposed for the PRS’

Mark Alexander, the founder of Property118.com, said: “This isn’t really a surprise but we all should be concerned should a similar rent cap be proposed for the PRS.

“Landlords won’t have access to taxpayers’ money like social landlords so many will struggle with a cap – while their own overheads increase and profits decline.

“This is something the entire sector needs to be vigilant about.”

The government’s proposals would see a cap on social housing rent increases being put in place for the coming financial year, with options at 3%, 5% and 7% being considered.

Prevent rents from rising significantly

The move would prevent rents for council and housing association houses from rising significantly, saving tenants an average £300 per year, and providing stability as inflation rises.

The government regulates how much social housing rents can increase each year.

Currently, this is set at up to the consumer price index (CPI) rate plus 1% – meaning potential increases next year of 11% in line with recent Bank of England forecasts.

The proposed new cap will help support the most vulnerable households in the face of cost-of-living pressures.

‘We must protect the most vulnerable households’

Greg Clark, the housing secretary, said: “We must protect the most vulnerable households in these exceptional circumstances during the year ahead.

“Putting a cap on rent increases for social tenants offers security and stability to families across England.”

He added: “We know many people are worried about the months ahead. We want to hear from landlords and social tenants on how we can make this work and support the people that need it most.”

The rent cap would be temporary and would apply from 1 April 2023 to 31 March 2024 and the consultation also seeks views on whether to set a limit for 2024-25.



Comments

DSR

10:09 AM, 31st August 2022, About a month ago

On one hand I doubt rent capping private tenancies will happen but instead I see more restrictions on evictions as that's a total vote winner for Joe Public and Shelter and Gen Rent. After all a LL is ALWAYS the bad guy right?

It also gets over the issue with the government not having to do anything about the broken court system so they can kick this can down the road on this again for a bit longer as there will be a veto on serving notices...and of course they wont have the issue of homelessness AFTER eviction to worry about either as its going to take years to actually evict someone anyway.

Lets just hope the S21 stays around till at least April 2023 (this is the date they are looking to cap social rents so I guess the date to cap private rents too will follow the same course?)

At that point I may just S21 every tenant I have as a fall back plan.

On balance I *think* I prefer rent caps...

John MacAlevey

10:27 AM, 31st August 2022, About a month ago

HMG is in panic mode as they will be for all the other fan-hitting merde coming our way. They really don`t have much idea about anything useful, least of all running the country with competance.

Claire Smith

10:41 AM, 31st August 2022, About a month ago

Any talk of rent caps actually becoming law is likely to be bad news for tenants as landlords rush to either evict or put rents up as far as the market allows. Many landlords currently have rents below market rate for long standing tenants.

Beaver

10:58 AM, 31st August 2022, About a month ago

Reply to the comment left by Claire Smith at 31/08/2022 - 10:41
This is correct; as costs are going up and the Bank of England is raising interest rates I have just put rent up, but I'm still below market rate (and below what I used to charge 6 years ago). I kept below market rate to encourage longer term tenancies and reduce the risk of void periods. But the costs that I don't control are still going up and that increases my risk.

If either central or local government introduce a rent cap or any measures that make it difficult to get rid of tenants then the only option is to raise rents to market rate in order to reduce risk.

The government needs to introduce policies that incentivise good landlords. If they don't then they will only make it worse for tenants.

northern landlord View Profile

18:55 PM, 31st August 2022, About a month ago

In my view it’s very likely that there will be rent caps in the PRS. Asking rents for new tenancies will still be decided by the laws of supply and demand as ever, but there will be limits on how much rents can be raised and how often. If the idea is to protect tenants from the effects of inflation, at the expense of landlords, rent rises must be pegged at less than inflation, otherwise there is no point. Like a lot of landlords I have tended not to increase rents but if controls are introduced it would be foolish not to always increase rents by the maximum allowed, whenever allowed.

If evictions for arrears start to rise an eviction ban also looks quite likely (looks like Scotland is going to have a winter eviction ban). A ban was introduced when living standards were under threat during the pandemic, so cannot be ruled out now living standards are again under threat. Who cried for landlords when this happened during the pandemic? Nobody.

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