By Colin Wiles, housing consultant.

Eat or heat. That will be the choice facing many households this winter. Soaring energy bills and rising food prices spell disaster for millions of people, and for housing providers the next couple of years are going to be incredibly difficult. Some big decisions will need to be made on multiple fronts, including rent setting, property management and tenant support.

According to the Office of National Statistics of the people who reported increases in their living costs eight in 10 cited rising energy costs as a primary cause.

In 2020, the poorest 10 percent of households spent more than half (54%) of their average weekly spend (£299) on essentials such as housing, electricity and gas, food and transport whereas the richest 10 percent spent 42% of their average weekly spend  on the same essentials.  The average incomes of council tenants are around a third of owners with a mortgage so millions of social housing tenants, will be spending a bigger share of their income on energy.

The latest estimates are that by January 2023 the poorest fifth of households will have to find an extra £1,800-£2,000 a year and pensioner households an additional £2,400, to use as much energy in 2023 as they did in 2023. I have no idea how many households will cope with this.

Last year I had a new gas boiler fitted and took it for granted that the gas would always flow and would be affordable. But the wholesale price of gas in January this year was almost four times higher than in early 2021.

Over the previous decade prices were stable or falling with the average bill for 2021 being £575 compared with almost £700 in 2014, and with almost nine in ten UK homes (86%) being heated by gas it seems all of us have been lulled into this false sense of security.

Of course, the homes with the poorest fuel efficiency will fare the worst – the English Housing Survey also shows that less than half (46%) of English homes had a Standard Assessment Procedure (SAP) rating of C or higher. Median fuel costs for a home with a D rating are 21% higher than those with an A-C rating (£1,279 compared with £1,057).

Actually, social housing homes are more energy efficient than private rented and owner occupied homes, but our residents are more likely to be poorer and on fixed incomes, so any savings are offset.

But it is not just energy prices; the truth is we have all become complacent about years of low inflation, cheap goods from China, and cheap labour from Eastern Europe. Now with Covid, Brexit and the Ukraine war it is all starting to unravel.

For social housing providers these inflationary pressures – not just in energy costs, but in food, labour and other costs – will have huge implications.

To begin with, homes will be colder, leading to more condensation, and more cold patches. Residents with repairing obligations such as shared owners will be more likely to skimp on property maintenance and this all adds up to more disrepair, leading to higher longer-term maintenance costs and capital spending.

Many tenants are likely to eat cheaper, less healthy food, so malnutrition will increase, as well hypothermia, especially among the elderly. Many people will seek to spend more time in warm public spaces like shopping centres and libraries. Providers should think about supporting such centres for their tenants.

We will also have to think very seriously about rent increases. The latest rent cap recommends an increase of 5%, but the real rate of inflation is likely to be 13% next year.

That means rising costs for providers and hard decisions to make about cutting budgets, at a time when the most vulnerable tenants will be hardest hit. Some might ask if it fair to implement any significant rent increase when tenants are struggling.

Inflation will impact upon staffing costs too. The pressure for strike action will grow and housing providers will struggle to recruit if they cannot pay the going rate. Will we see salary wars breaking out in the sector as providers seek to attract the best staff? Boards will have to think hard about executive pay, the subject of much criticism in recent years.

Perversely, these inflationary pressures, although they are disastrous for many people, could have some beneficial consequences. The rise in energy prices is equivalent to a carbon tax (with the key difference that suppliers receive the profits and not the government) that will reduce fuel consumption, and it will also help to make carbon-reducing projects such as insulation, heat pumps, solar more viable by reducing payback times. But conversely, many countries will be tempted to ramp up their coal fired stations, and to start fracking.

Inflation can also be beneficial as it helps to reduce debt payments for those on fixed rate payments,  and can stimulate demand – what Keynes called The Paradox of Thrift – if prices are falling or static consumers can hold off making purchases, but if prices are rising they are more likely to buy before they become even more expensive.

There will be trouble ahead. Your governing body will need to be fully informed of all the worst case scenarios and to start thinking hard about how they plan to respond. Putting tenants at the very heart of their thinking will be critical.