4 million ‘social housing’ households face threat of double digit rent increase – time to campaign for a rent freeze

Labour Campaign for Council Housing

Media Release August 3^rd 2022

More than 4 million council and housing association homes are facing the threat of a double digit rent increase next April. The Labour Campaign for Council Housing has written to tenant unions and housing campaigns proposing a coalition to campaign for the government, as an emergency measure, to introduce a rent freeze.

Why a double digit rent increase?

Council and housing association rents are subject to central government regulations. In 2020 the government introduced a rent formula of CPI+1%. The CPI rate for determining the annual rent increase is the September figure. Currently CPI is 9.4%. If the September figure is, for example 10%, then tenants would be facing the possibility of an 11% rent increase next April.

However, CPI+1% is a “ceiling”. Landlords don’t have to increase the rent by the maximum. They “are free to apply a lower rent increase, or to freeze, or reduce rents, if they wish to do so”. As we know from a recent Inside Housing survey in relation to this year’s rent increase, most councils and housing associations raised the rent by the maximum of 4.1%, However some councils increased rent by the inflation rate of 3.1% or less and two councils froze the rent.

What would be the impact of a 10% rent increase?

With huge increases in energy charges due in October and January a double digit rent increase will have a drastic impact on tenants, potentially driving many of them over the financial edge. There is little more stressful than struggling to pay the rent and facing the threat of eviction. As the Money & Mental Health Policy Institute has said: “The stress and worry of accruing rent arrears can exacerbate existing mental health problems, and, for some, this can cause a mental health crisis.”

An unprecedented rent increase will push even more people into the choice of ‘eating or heating’ and parents sometimes having to go without food to ensure their children eat. In the last year we have seen media reports about the problem of damp and mould in some ‘social housing’. A double digit rent increase would undoubtedly mean that more people would be unable to afford to turn on their heating. As we know, a cold home is detrimental to health and can kill vulnerable people.

Objections to a freeze?

Councils and housing associations will argue that they cannot afford to freeze rent; that unless they increase them by inflation they will not have enough money to maintain and renew existing homes. We recognise that this is a genuine problem because housing revenue accounts (HRAs) are not subsidised. They are ‘ring-fenced’ which means that money from council general funds cannot support council housing. More than 92% of their income comes from tenants’ rent and service charges. Moreover, they are under-funded as a result of government policy (e.g. a 4 year rent cut, and the loss of rental income owing to increased discounts under Right to Buy which produced a fourfold increase of sales). Yet this under-funding cannot be resolved by driving up rents to levels that tenants cannot afford. Over the last three years, in England, council tenant rent arrears increased by 34% to £317 million. A double digit rent increase will drive up arrears further.

In the case of housing associations they have reserves of £56.7 billion and made a profit of £1.3 billion on house sales last year, a much stronger position than councils.

Councils housing: let the government fund a freeze

Because of the under-funding of council HRAs, and the impact of a freeze on them without any mitigating action, we are calling for the government to fund a rent freeze. We can put a figure on it based on government statistics: it would cost around £730 million(the equivalent of a 10% rent increase). This sounds like a lot of money but it is not much more than the £620 million that the government has gifted second home owners to help them with their energy bills!

Uniting across the tenures

Profiteering is rife in the private sector. Rents are much higher, and have increased by 10% or more over the last year. A freeze should be applied to them as well. In the three rent sectors, council, housing associations and private, there are nearly nine million households. If more of them were organised they could be a real force for pressuring the government. We have already seen how influential the new tenant unions and campaigns can be in relation to Section 21 evictions in the private sector. The government, although it has prevaricated over its commitment to end them, has been forced to act.

Initial responses to our campaign’s proposal have been positive: the Defend Council Housing campaign, Greater Manchester Tenants Union, Labour Homelessness Campaign and Homes4All are supportive.

Whilst next April may appear to be a long way off, September’s inflation figure will set the benchmark for next year’s rent increase. That’s why it is urgent to get cracking on campaigning for a rent freeze because councils will soon be looking at next year’s HRA budgets. We are calling on Labour councils to campaign for the government fund a rent freeze for council housing.

Martin Wicks, Secretary of the Labour Campaign for Council Housing said:

“Adding an unprecedented rent increase on top of the financial pressure already faced by tenants, who for the most part are poor, will impoverish them further. Millions of people are worrying about whether they will be able to afford the essentials of life through the winter when they will need their heating on but will be faced with unaffordable bills. A 10% rent rise will increase the stress on people who are already struggling to get by from month to month. Nobody can have a stable life without the security of a roof over their head and rent which is within their means.

If Labour is “on your side” then it should be demanding the government introduce a rent freeze as an emergency measure. If the government can lavish £620 million on second home owners to help them with their energy bills, they can afford to fund councils to cover the loss of rent because of a freeze.

The trades unions, whose members are at the sharp end of the ‘cost of living crisis’, have an interest in campaigning against their members being impoverished by their landlords as well as for a living wage. The unions affiliated to the Labour Party should be demanding that Labour campaigns on this issue. We cannot passively wait for the next general election.

The financial dilemma faced by Labour councils cannot be resolved on the local level. There needs to be a national campaign for sufficient funding to maintain and renew existing homes to a decent standard. Increasing rents to levels that tenants cannot afford is no solution to the under-funding.

Bringing together a coalition of tenant organisations and housing campaigns, reinforced by labour movement organisations will help to build a national movement. Ultimately it will only be the scale of the campaign involving those who are threatened by very high rent increases, which will force the government into action.”