Treasury confirms plans to increase social housing rents in England to curb inflation

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British Prime Minister Rachel Reeves has announced plans to immediately inject $500 million in cash into housing associations and councils to boost social housing rents above inflation over the next five to 10 years, while also boosting the creation of affordable homes. .

Reeves will introduce a formula in next week's budget to increase annual rents in England by an extra 1% on the current 1.7%, based on the Consumer Price Index.

The Prime Minister is expected to announce a consultation on introducing this as a long-term solution in his fiscal decision on Wednesday. The Treasury said it would consider a five-year CPI+1 deal, but added that the consultation would also seek views on other potential options to provide greater certainty, such as providing a 10-year agreement.

The move is designed to promote the building of more affordable homes by providing cash flow certainty to indebted housing associations and councils. The government sets rent levels for subsidized social housing based on a national formula.

At the same time, Reeves will announce an additional $500 million for the Affordable Homes Program, an existing $11.5 billion five-year plan that allocates funds to housing authorities and councils to build new homes.

Deputy Prime Minister Angela Rayner, who is also housing minister, engaged in fierce spending negotiations with the prime minister earlier this month to secure more funding for AHP.

Reeves also said the spending review would establish details of new investments in affordable housing when existing programs end in 2026.

We must solve the housing crisis in this country. This has left generations trapped in the real estate market, divided communities and put a damper on economic growth, she said.

In recent years, local authorities have delivered only a small number of new homes, leaving the task of building most new social housing to not-for-profit housing associations.

Guaranteed higher rents would please housing associations, but could force the government to propose a much higher benefits bill while provoking a backlash from millions of tenants.

The previous Conservative government made a similar promise to settle rents over 10 years based on the 2012 Retail Price Index plus 0.5%, but broke this in 2015 to save on housing benefit costs. A similar five-year contract in 2020 was temporarily suspended in 2022 when inflation soared.

Ensuring certainty about rents was a key demand from 20 of England's largest local council landlords, who published a report this summer warning that the UK's council housing system was broken.

The Prime Minister will also confirm plans to cut discounts on right-to-buy transactions, where tenants buy council properties they have been renting. At the same time, the council can retain 100% of the profits generated from such sales.

Ministers hope this will have the net effect of allowing local authorities to get more money to build social housing, while also enabling long-term tenants to buy their own homes.

Polly Neate, chief executive of housing charity Shelter, said the increased funding was a welcome step at a time when homelessness was soaring in the UK.

Over the decades, we've lost more public housing than we built, causing private rents to skyrocket to record highs and homeless housing costs running into billions of dollars, she said.

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