Rent and Service Charge Standard Consultation

This is the first of two new posts inspired by the Housing View Team (the very brilliant Justin Bates and Andrew Dymond) which produce a weekly newsletter about housing law and which also carries news about Welsh housing law (sign up here).

This post concerns the WG’s consultation on the rent and service charge standard.  This rather dry sounding title is probably the single most important regulation affecting tenants in the social housing sector (both local authorities and RSLs).  It also signals what we mean by “social” in social housing, and so it is important to the WG too.  For tenants, it determines how much their rent will increase collectively, and how much more they will need to find to pay it.  For landlords, it is their form of income, which enables them to invest in and develop their housing stock.  Set at too low a level and RSLs may find their operations affected and unable to develop new housing (a key goal of the WG).  Set at too high a level and tenants find it unaffordable and unsustainable.

Everybody agrees, I think, that social housing rents and service charges should be “affordable”; but that is a word which is incapable of proper definition.  The WG’s consultation suggests that social rent policy could be reduced to the following principle: “affordability requires balancing the needs of social landlords and their tenants, ensuring rents remain affordable for both new and existing tenants while enabling social landlords to meet tenants’ housing need” (original emphasis).  The first part of that principle is unobjectionable and obvious, but one can observe that it does not really help with how those needs can be balanced as they will be in tension on the reasonable hypothesis that social landlords will feel that their needs mean that affordability should be balanced in their favour and vice versa (although, in my experience, that can be overblown – each recognises the needs of the other).  However, this seems like a pretty circular principle which doesn’t really help us.  In other words, I wonder whether it is, in fact, rather meaningless; and, further, I wonder whether we actually need a principle beyond the word itself.  Other words are used in the sector – fairness, transparency, and sustainable – but people have written lengthy treatises on each of these and we argue about their meaning.  So, if the idea behind a principle is to “demonstrate our commitment to ensuring affordability in the social housing sector”, then perhaps you don’t need more than that phrase.

Moving on, the easiest part of this paper, I think, is about rent increases which the paper suggests should be CPI+1%, as it is now.  That is sensible because it balances everybody’s interests and, more importantly (because the audience is not necessarily tenants and landlords – see below), ensures consistency.  The paper is consulting over whether it should remains as such for five or ten years, and whether the scope for further government intervention should be outside the bottom range of 0-3% CPI. These are not necessarily questions, I think, which we might feel that strongly about; but, this is where that point about audience becomes critical.  We know that the WG are pretty desperate to increase social sector development but can’t afford to fund it themselves.  The full range of money markets and ratings agencies are the real audience here – what will they think of these proposals?  That is the only real question.

The part on service charges is great fun.  This is where the WG essentially have thrown their arms up in the air and recognise that there is so much variability added to the fact that, a quirk of devolution, the UK Government’s Leasehold and Freehold Reform Act 2024  and the Heat Networks (Market Framework) (Great Britain) Regulations 2025 SI 2025/269 will have an impact here.  These are both pretty important sets of regulations which will have a massive effect on service charges and add new regulators into the mix about which, I’m aware, social landlords are really concerned.  Other issues are that some service charges are at a fixed and some at a variable price.  Given all of this (and more), all the WG can do is issue guidance on how to ensure transparency and consistency and affordability.  This is going to be an area of some conflict going forward and working out what the rent actually is might be quite difficult.