The G15, a group of London housing associations, has warned that if the government was to implement its social housing rent cap at 3%, the organisations would see a reduction in re-investable rental income over 30 years of nearly £18bn.

It comes as the consultation on the rent cap closes next week. Ahead of that, the organisations say that “it would be extremely unlikely that any organisation would seek to apply the maximum possible increase next year under the existing social rent setting standard” if no cap was introduced at all.

The statement by the organisations also goes on to say that for shared owners, who are not currently covered by the cap, their rent increases depend on what the government decides on social rents.

The G15 has outlined the potential losses:

	Reduction in re-investable rental income over 5 years	Reduction in re-investable rental income over 10 years	Reduction in re-investable rental income over 30 years
Rent ceiling at 3%	£2.071bn	£4.661bn	£17.959bn
Rent ceiling at 5%	£1.516bn	£3.493bn	£13.473bn
Rent ceiling at 7%	£1.017bn	£2.380bn	£9.296bn

 

The warning about the losses from the associations is stark. They say: “The surpluses (and/or ‘reserves’) that are reported as part of our financial results are not ‘rainy day’ funds that can simply be applied to cover costs elsewhere. Instead, they are key to securing borrowing to deliver the essential work that we do, and are held as fixed assets and working capital, rather than cash.

“Housing associations have already seen costs for vital materials for repairs and maintenance work increase by as much as 16.8% this year, and the cost of constructing new homes has grown by more than 11%.

“Energy costs for G15 members are forecast to have increased by 225% for electricity and by 573% for gas, on average, between 2021/22 and 2023/24. These above inflation increases present significant pressures on members’ budgets and investment plans.

“Insurance premiums have also increased sharply over recent years, with one G15 member seeing increases of over £3m in the last two years, and another seeing increases of over 100% year-on-year. Service charges are also rising with inflation, or higher, which places further pressures on both providers and residents (in the case of variable service charges).”

Outlining where the loss of income would hit most, the statement lists building safety, repairs, decarbonisation, new homes, and financial capacity.

The G15 also sets out a series of recommendations for government, including:

• Social security payments should be uprated in line with September inflation measures to support the least well-off, recognising that approximately 68% of G15 members’ general needs residents are in receipt of Universal Credit.
• A specific exemption should be made for supported housing from the proposed rent ceilings, recognising the viability challenges that would be created otherwise and the impact this could have on the delivery of such critical services.
• Mitigations must be announced alongside any rent ceiling decision to prevent significant reduction in investment in existing and new homes, including:
  • the reintroduction of rent convergence
  • allowing Recycled Capital Grant Funding (RCGF) to fund major repairs
  • additional grant funding for development of affordable homes
  • removing VAT on housing association activity
  • discussions on the post-2025 rent settlement should introduce a long-term approach based on key principles to secure the financial future of the sector and affordability for residents.