A consultation has been launched to invite views from social housing tenants and landlords on a proposed rent cap to understand how best to support households with the cost of living.

Under the proposals, a cap on social housing rent increases would be put in place for the coming financial year, with options at three, five and seven percent being considered.

The consultation will run for six weeks closing on 12 October. Following the consultation period, the Secretary of State will direct the Regulator of Social Housing on rent standards, confirming the maximum amount social housing landlords can increase rents by for 1 April 2023 to 31 March 2024.

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 one per cent – meaning potential increases next year of 11% in line with recent Bank of England forecasts.

Housing Secretary Greg Clark 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.

“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. The consultation also seeks views on whether to set a limit for 2024-25. The Government “understands this will impact social housing landlords and is engaging fully with the sector”.

Following the consultation, a final decision will be announced later this year.

The government is also committing to reviewing social rent policy beyond 2025, via a separate consultation due to be launched next year.

Cllr James Jamieson, Chairman of the Local Government Association and Kate Henderson, Chief Executive of the National Housing Federation, said: “Councils and not-for-profit housing associations are very concerned about the impact rising living costs are having on social housing residents.

“Housing providers have been carefully considering their approach to next year’s rents and will do all they can to keep increases low where possible. Working with partners, councils and housing associations will continue to do what they can to protect people from hardship, targeting help at people facing the most complex and acute challenges.

“We are glad to have the opportunity to respond to the Government’s consultation and will be talking to members over the coming weeks before responding in more detail.

“However, we are very concerned that a new cap on social housing rent increases will significantly impact on housing providers’ ability to provide critical services for residents and invest in new and existing homes.

“Decisions on the level of rent increases for tenants need to be made by housing providers within the existing government rent policy commitment, ensuring that there is a careful balance between affordability for tenants and investment in the homes that they live in.

“If the Government does take forward a lower cap, then it should provide additional funding for 2023/24 and for future years so that housing providers can continue to safeguard services and meet the country’s future housing needs.”

Sue Phillips, Founder of Shared Ownership Resources, said: “Shared ownership promises ‘affordability’ to entrants to the scheme. But excluding shared owners from protections offered by a rent cap simply emphasises the hollowness of that promise. Shared ownership has never delivered long-term affordability.

“In fact, one-fifth of shared owners were in poverty in 2019/20. Shared owner poverty rates will inevitably escalate rapidly during the 2022-2023 cost of living crisis. How many will face impossible choices between paying rent or paying for day-to-day essentials including food and energy? And how will they ever recover given ‘upward only’ annual rent reviews?

“The counter-productiveness of the cross-subsidy model has never been clearer.”