Crisis in social rent rises of £2.5 billion pa above inflation sought by social (sic) landlords

Did you know that council and housing association landlords are demanding £2.5 billion per year more in rent from their tenants over and above inflation for a decade from 2020?

£25 billion more than inflation from tenants over a ten-year period from April 2020 to March 2030 and that figure takes no account of any more rip-off ‘affordable rent’ properties either new or conversions.  

Time to get on with the detail and anyone who reads this fully will be amazed at the scale of incompetence and delusion of the social rented sector landlord.   

Last week a report was published called Setting Social Rent and commissioned by SHOUT, LGA and ARCH for a cross-section of all UK social landlords that proposed a range of inflation-plus rent increases from tenants that in overall terms averaged price inflation (CPI) plus 1.8%. 

It was commissioned by Local Government Association (LGA) and ARCH, Association of Retained Council Housing, clearly representing the council landlords and SHOUT that has on its board housing association chief executives including the past chair of PlaceShapers a HA umbrella group that represents over 100 leading HAs nationwide and has the current President of the Chartered Institute of Housing (CIH). All of this broad cross-section of UK social (sic) landlords are happy to get more and more in rent from the long-suffering social tenant (32% average rent increases from 2010 to 2017 against inflation of less than 17%) and this shaft-the-tenant-because-landlords-wont-challenge-government-to-pay-for-more-housing-supply positions has to stop. 

The social tenant can no longer be the social (sic) landlord cash cow that landlords choose to shaft year on year.  The on average CPI+1.8% position shafts the social tenant significantly as I detail below.

Did you also know the decision on these scandalous rent increases will be taken sometime in 2018? I suspect not as social housing tenants are always given the mushroom treatment by the blood sucking leeches who have the temerity to call themselves social landlords. The current 4.4 million social tenants in Britain can prevent these rent increases if they finally get off their backsides and organise quickly which they must.

I detail all of these facts and figures later on and there is no doubt over them and instead ask all a simple question to all tenants of councils and housing associations: –

Would you pay £1 per week to save over £1000 a year in rent for the next ten years?

Before you answer that no-brainer of a question let me clarify. Would you be prepared to pay a one-off £50 total fee in order to save £10,062 in average rent between April 2020 and March 2030?

Give me £50 and I will save you over £10,000 over the next ten years sounds too good to be true doesn’t it? It sounds so absurd that this couldn’t possibly be the case.  Please note well I am not asking for any money at all here I am merely using the example to tell social tenants what they should do and do quickly which is organise on a national lobby scale.

Ok the saving to the council tenant in the regions will only be £8,573 in that time, the housing association tenant in the regions is also less than £10,000 at just £9,831 over ten years, but the London council tenant would save £12,690 and the London housing association tenant would save £13,333 over ten years – and on average this means an average saving of £10,062 over ten years for all social tenants for a one-off £50 fee.

That still sounds way too good to be true yet it can be easily proved and it all concerns the social housing rent setting formula and inflation.

  • The government (DCLG not DWP) wants to give a rent increase of inflation plus 1%

  • The social landlords are demanding inflation plus 1.8%

  • Tenants should be demanding inflation minus 1%

It is those seemingly minor differences that realise the £10,062 tenant saving between a rent increase of inflation plus 1.8% and the increase of inflation minus 1% and the chart below reveals what this means in terms of weekly rents for the average social housing tenant.

rent 2020 to 2030

Apologies as the chart above looks a bit raggedy or confusing but it is a hard set of figures to present as a chart. What it shows is a starting point of the average social rent of £102 per week across England that is increased by the three different demands from April 2020.

If the average social rent level was increase just by inflation (the current 3% CPI inflation) depicted by the blue line then the average £102 per week rent now would increase to £137.08 by 2029/30. 

Yet the social (sic) landlord demand is for rent to increase by CPI plus 1.8% and depicted by the red line which would see rent increase from the same £102 per week to a whopping £163.01 per week by 2029/30 which is £25.93 per week more than inflation and that is a social landlord demand that each tenant gives them £1,353 per year more than inflation in rent by 2020/30 and in that year alone £5.95 billion above CPI inflation in that year alone!

Yet if social housing rents increase by inflation minus 1% – the yellow line – then the £102 per week rent now become £124.34 per week in 2029/30 which is £38.67 per week less and £2018 per year less than the landlord demand. Below is the chart produced alleging optimum rent increases by each region that aside from being offensive is both unworkable and based on hugely spurious assumptions that I will address later. 

capita 1.8%plus

Perhaps the quickest way to describe just how inept this proposal is is revealed in the report which assumes and says that private rent levels will increase by CPI (currently 3%) and social rents should increase by the overall average of CPI+1.8% (4.8%) that the chart below shows will see social (sic) landlords get more in Housing Benefit that the average amount a private landlord gets in LHA, the private rented sector version of housing benefit. 

The report is that inept and focused on being a paid report to social landlords that it doesn’t even realise this impact yet it does occur as the figures prove!! Notice how the red line – the average housing benefit a housing association landlord gets -goes above the blue line – the average weekly amount of housing benefit the private landlord receives – in 2028/29 to prove the case!

prs 3 and srs 4.8% to 2030

More significantly, the obsession with writing a report to argue that CPI+1.8% average is deserved  / best option for social (sic) landlords the report makes the wild assumption that LHA the private landlord housing benefit will jump to 3% annual increases when from 2010 to 2017 the average LHA only increased by 0.86% in actual terms against the same 16.6% CPI inflation in that time. 

Table 5 of the latest official housing benefit data reveals that social landlords housing benefit average per week increased 22.54% from May 2010 to May 2017, an increase of £16.43 per week from £72.88 to £89.31 per week.  For private landlords the increase was 0.86% and a £0.94 per week from £109.79 to £110.73 in the same time. 

IF the housing benefit had been linked to just inflation this £72.88 for social landlords would have been £84.97 by May 2017 yet it was £89.31 and £4.34 per tenant per week above inflation that does not sound much until you multiply it by 4.4 million social housing households and then it becomes £19.1 million per week over and above inflation and in the year 2016/17 some £996.4 million alone in that year!  This also means the DWP paid out £737 million per year over and above inflation through housing benefit to social landlords in 2016/17 and why the housing benefit bill has actually increased in real terms just as I said it would and the IFS confirmed in their figures and the bedroom tax and overall benefit cap policies have not saved a penny!  

I would suggest at most that LHA will increase by 1% per year over the period 2020 to 2030 (which is over 8 times higher than it has increased since 2010 at an average 0.12% in actual terms and below inflation in real terms) and a chart based on that far more reasonable assumption than the outlandish 3% LHA increase assumption versus the 4.8% social landlord demand is below. 

You will see in this more realistic illustration that the average housing benefit weekly amount for all social landlords outstrips the private landlord housing benefit weekly amount too even for council landlords in 2028 and for housing associations by 2025!   So inherent in this woeful report is the posit that (a) councils will receive more per tenant per week in housing than the private rented tenant; and of course (b) that the private landlord will be happy with this!

rents 4.8% srs 1% prs

Why would government agree to inflation minus 1 per cent (the Tenant Demand)?

Any government agrees only to what benefits them is my starting point and while that is perhaps a tad cynical (only a tad mind) it is a starting point that makes my case even stronger for what I call the Tenant Demand of inflation minus 1 per cent.

The first argument is that in social housing Housing Benefit is paid by government for almost 74% of all tenants and so the more that social housing rents increase the more that government (and specifically DWP which is important) pays out in social security benefit, or to use their phrase more in welfare. 

The lower the social housing rent increase the less that the DWP pays out in welfare and noting that Housing Benefit and its Universal Credit replacement is the largest cost welfare benefit after State Pension.

The most up-to date official figures reveal that of the 4.4 million social housing tenancies in the UK sees 3,099,500 social tenants receiving Housing Benefit and a further 125,850 receiving its UC replacement making a total of 3,235,350 social tenants out of 4.4 million which is 73.53% of all UK social tenants receive housing benefit.

The current position is that late last year the Secretary of State at DCLG (as was) which is where UK housing policy sits announced that the social housing rent setting formula would be increased by inflation plus 1%.  Yet a few weeks late in a written answer the Government announced that the rent increase is not set in stone, and, would be subject to a consultation process sometime in the next year, which is now this year of 2018.  The detail of all of this is here and a screenshot of the official written answer is below.

consultcpi+1%

The problem for Government is that this announcement by the DCLG department commits the DWP department to pay an additional £18 billion in Housing Benefit over and above inflation over this ten-year period and was not a decision that the DCLG Minister Sajid Javid is able to make before getting agreement of the DWP to pay this average £1.8 billion per year HB excess, and also the agreement of HM Treasury to pay it. 

In short the DCLG is responsible for housing policy but not for housing benefit policy or payment and Sajid Javid before he announces rent increases in social housing needs to get the permission of Esther McVey as the now Secretary of State Work and Pensions and the agreement of the Chancellor of the Exchequer Philip Hammond to agree to pay 73.57% of any social housing rent increase with Housing Benefit.  Generally because 74% of social housing tenants are dependent on ‘welfare’ (Housing Benefit) to pay council and housing association rents the DWP and the Treasury are in control of UK housing policy and not the DCLG.

Using my figures above the argument of the Tenant Demand is an argument which says to the DWP pay out 3,235,350 lots of Housing Benefit at £2,018 per year less for each than the landlord demand you pay out in 2029/30 and save in that year some £6.53 billion in that year alone by agreeing to the Tenant Demand position of inflation minus 1% – a very appealing prospect to the DWP, HM Treasury and every other government department bar the DCLG.  The figures are not that high as the average HB payment to social landlords is £89.60 per week not the average rent figure of £102 per week in social housing so the overall saving to the DWP and HM Treasury in 2029/30 would not be the £6.53 billion figure above, yet over the ten-year period the saving to the HB budget would be £18.01 billion. 

So the DWP would save an average £1.8 billion per year by agreeing to the Tenant Demand of inflation minus 1% and would mean Sajid Javid the Secretary of State having to go directly to HM Treasury to get the extra money he announced which, I hasten to add he should, as if Government want social landlords to have more money so they can build more then Government can still pay that money instead of the offensive process ever since 2010 of social landlords getting extra income by charging social tenants way above average rent rises that average 32% when inflation was just 16.6%; and from the affordable (sic) rent programme a few years after that. 

What should happen is that the social landlord sector can argue for the same aggregate amount of money they are seeking in CPI+1.8% by all means yet the additional amount over and above CPI minus 1% should come NOT from the existing tenant via the housing benefit system and thus from DWP, and/or from self-paying social tenants many of whom are pensioners and low paid working age already struggling with inflation-busting rent increases of 32% (that also means HB increase of 22.54% means HB is not covering the full rent increase too), but come direct from the DCLG as was now renamed MHCLG. 

The Sajid Javid announcement is a case of him saying his department will put more money into housing yet expect the DWP to pay for it with housing benefit (the let housing benefit take the strain position) which means that 100% of social tenants also take the strain with these outrageous increases.  The self-paying social tenant not in receipt of housing benefit pays the full increase and in an ever increasing number of cases even the social tenant in receipt of housing benefit pays more out of a subsistence benefit income or from a low paid income with the overall benefit cap policy and the bedroom tax policy and other policies that cut housing benefit. 

There is no doubt of a strong correlation between significantly above inflation social rent rises since 2010, that has been far higher than private rent increases too, and the increase in homelessness since 2010 and increased social housing evictions over that period.  There is also a significant correlation between inflation-busting social rent rises and the sharply increased refusal of social (sic) landlords refusing to accommodate the benefit tenant that I predicted 5 years ago and the September 2017 report from the University of Sheffield for CIH revealed.  Social landlord inflation-busting rent increases cause homelessness for existing social tenants AND the prospective social tenant by being refused social housing due to affordability and thus going directly to the homeless department.  The latter is up to 400,000 per year given that 400,000 new social tenancies happen each year and so social rent rises of above inflation mean more and more existing and prospective tenants are hit by the overall benefit cap limit and existing tenants are evicted and become homeless and prospective tenants go straight to being homeless. 

The Setting Social Rent report (SSR) assumes that the overall benefit cap limit will increase by this rent inflation it proposes, that is 4.8% per year and is yet another delusional assumption used in their optimum rent levels and the rest of this woeful report.  The OBC limit was set in 2012 and the policy began in 2013 and remained a static figure up until November 2016 when it was cut in actual terms by 23% in the regions and 11.5% in London from £26,000 per year to £20,000 in the regions and £23,000 in London.  There is not a hope in hell’s chance it will be index linked to CPI inflation or the higher rent inflation and the SSR report is hopelessly deluded … and again it adopts this never in a month of Sunday’s assumption to downplay the interaction of the overall benefit cap with inflation-busting social rent increases. 

This is not only a hugely skewed proposal and a pitiful example of a piece of bought research that shafts the hell out of long-suffering social tenants, it will also if implemented mean that social landlords will go bust and a classic case of greed seeing social (sic) landlords shooting themselves in the foot … and with a Howitzer too!  I have detailed this argument before (see here for example) but, yet again, the deluded idiots from Capita Economics also admit this themselves but do not see it as they are so incompetent as indeed are SHOUT, LGA and ARCH in agreeing to this delusional economic nonsense in the report.   

The report correctly says on on page 11 that: 

On average, the government welfare bill is higher for housing benefit claimants that are housed in the private sector, than in social housing, because of the higher rents. As such, there is a fiscal saving to the government for every household that they can move into a new social home.

Yet the proposal and recommended solution the report makes sees the average housing benefit for social landlords go above the average housing benefit amount for private landlords (that this risible report fails to see despite being fact) and so the solution of CPI+1.8% for social landlords it recommends means a fiscal COST to government, or it costs government more!!  This is where my correct analysis which the figures prove and even if private housing benefit (LHA) increases at 3% CPI gets a bit of a rant. 

Aside from revealing this Setting Social Rent report has been authored by incompetents and is woeful, hugely assumptive and riddled with errors of omission and commission, this same report has been approved by LGA, ARCH and SHOUT and reveals that they too are so near-sighted and focused only on getting more and more money for social landlords and via tenants that they too miss the fact – and it is a fact that a simple spreadsheet proves – that average HB receipt per tenant for social landlords becomes more than average LHA receipt for the private tenant! 

Here’s those same charts again to hammer the point home to the shameful cross-section of social (sic) landlords and social (sic) landlord lobbies who commissioned and approved the 46 page report of economic fallacy. 

 

Why does these collective group of social landlords and lobbies think it is acceptable to keep on screwing the hell out of the social tenant and while stating at every possible turn how social purpose courses through their veins!!  I further ask these ‘great and good’ of the social rented sector what planet are you living on if you think the much larger private rented sector will say its fine you get more in HB than we do! 

Aside from the average £2.5 billion more per year in social rent over and above inflation that these so-called social landlords replete with social purpose want to burden the social tenant with, the same great and good have approved a policy of greater HB for social landlords than for private landlords that exposes their own individual and collective ignorance of what they are advocating.  Their credibility will be laughed at by central government and regardless of what government is in office.  As the simple spreadsheet derived chart proves if you inflate todays rate of housing benefit paid in LHA by 3% CPI and at the same time inflate today’s rate of HB paid to social landlords by 4.8% then this is precisely what it does mean. 

It further means so many things such as the impact this will have on communities and on employment and on home ownership all of which will be hugely and significantly affected in an adverse way.  When the cheapest form of rented housing increases so sharply the chance of saving for a mortgage deposit is much more difficult; as is the possibility of a new employer finding workers he can afford to pay as they need much higher wages to make work pay because of hugely increased rent levels.  It creates and under-underclass who cannot afford any form of rent and becomes a no job no house situation.  Homelessness rockets and becomes even more systemic than it is now and directly caused by social (sic, sic, sic) landlord short-term greed. 

I have taken a few days to write this post and carefully considered how to write it too.  I could have drafted double this length with examples of how to pay the £1,353 per year more in rent over and above inflation the tenant would need to earn an additional £1,700 or so per year just to stand still.  That means local employers instead of paying the national minimum wage of £7.83 per hour would need to pay £8.72 per hour in totals terms.  That is one such impact of this outrageous rent rise proposed by social (sic) landlords who ought to be renamed feudal landlords for this intention and proposal! 

Oh I forgot to mention that on top of the £2.5bn over inflation each year in revenue funding (rents) these same feudal landlords also demand a return to grant subsidy from Government too!  What planet are they on?!  In summary I could make a logical argument that social landlords deserve more in housing benefit than private landlords as they do provide a better product and service.  I would strongly make the argument that Government does return to paying grant / subsidy to social landlords if, and its a big if, in return for new properties at a social rent level. 

What I cannot accept is social (sic) landlords treating the tenant as cash cow and demanding above inflation rent rises from them each year.  It is little short of delusional thievery and it does increase homelessness too and the argument they make is only because social landlords are too weak to demand government fund the very cost-effective subsidy system as it used to do and so instead they rip off the perceived defenceless and weak social tenant. 

Those social tenants need to flex the huge political and electoral power of being circa 6 million voters living in the 4.4 million UK social housing properties and tell landlords and Government that enough is enough and you can shove your above inflation rent rises where the sun doesn’t shine.  That can only happen if social tenants do unite in some from of lobby or union or similar campaign group and my example of them all paying a one-off £50 would save them more than £10,000 each on average between 2020 and 2030.  It is a no-brainer and something social tenants should do and do quickly as the consultation on these rent rises is sometime this year. 

Yes that’s a polite way of saying get off your backsides social tenants else you will be shafted even more than you have since 2010 and you can’t say I haven’t warned you about the feudal, dangerous and incompetent landlords you have!

2 thoughts on “Crisis in social rent rises of £2.5 billion pa above inflation sought by social (sic) landlords”

  1. Wales has powers over housing policy but not over housing benefit policy which is UK-wide (confusing with some potential to differ in Scotland but not in Wales)

    Like

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