It is said nothing is certain in life except death and taxes. I would make two additions to that list:
- Politicians will always want to interfere with rents and rent levels
- No two people can ever agree the definition of an affordable rent
These ‘truths’ may not yet be ‘universally acknowledged’ but they are the reasons I believe that not only is the campaign for rent freedom for housing associations unlikely to be successful, but also that housing associations would have huge difficulties coping with that freedom if it was granted.
Let’s look at my first ‘certainty’. We currently have social rents, affordable rents and a four-year 1% rent reduction. The social rent formula has the fingerprints of Nick Raynsford, former housing minister, all over it. The affordable rent definition came from Grant Shapps when he was housing minister. The 1% rent reduction came straight from former chancellor George Osborne. None of these decisions/formulas, as I recall, were up for discussion and debate.
Be careful what you wish for and don’t think you can escape political interference.
The politicians saw it as their democratic right to set rent levels in the housing association (and local authority) sector and not just because of the amount of grant that housing associations have received historically. It is wider than that. Although we want to see ourselves as independent organisations, as housing associations we exist in an environment that is highly politicised and where we need public and political support. The quid pro quo is that we have controls imposed on us and have to account for our actions.
But even if Gavin Barwell or Theresa May were to grant rent freedom, how long would it last? I get the point that the government doesn’t need to control our rents in order to keep public expenditure down because the benefit system does that now.
But Labour (and other party) politicians talk frequently about bringing in controls for private sector rents even though the benefit caps apply there too, and wouldn’t maximum rent levels still feature in local authority planning conditions and grant conditions?
So how about my second ‘certainty’? Well, calculating an (official) affordable rent is, in theory, as simple as it can get. You get an independent valuation of the market rent for the property and take 80%. Ah, but hang on! The service charge, if there is one, has to be included in the rent. And the 80% rent is a maximum. Should we charge less than 80% and, if so, how much less and should there be differentials for different types of properties? Even a ‘simple’ system that follows Government guidelines becomes complicated and open to challenge.
So what if there are no Government guidelines? How do we set and then justify the rents we are charging?
Should we start by trying to agree the definition of a ‘genuinely affordable’ rent? In other words, should we take into account the ability of the tenant to pay? But every tenant is different so should every rent be different? And is that fair or should the rent be the same for similar properties? And is there an overall level of income that the association needs coming in from rents - to pay loan interest, maintenance and management costs and void and arrears costs - which should be the starting point? Cue for endless debates at Board and at tenant meetings and challenges from external ‘interested parties’.
So rent freedom? Be careful what you wish for and don’t think you can escape political interference.