Inflation Figures Could Mean Lower Rent Increases for Social Housing Tenants

Housing association and council tenants may receive rent increases of no more than 3.1 % (not including up to £2 a week extra that some tenants could pay under rent convergence rules) following the inflation figures announced this morning by the Treasury.

The retail price index, one of the key measures for economic growth, fell in September to 2.6 %, its lowest level since December 2009. September’s RPI figure is used as the basis for calculating rents for the following year.

Many benefit claimants, however, could face harder times after the consumer price index fell to 2.2% (it’s lowest in three years). The CPI is used as a base for a number of benefits including income support and the Jobseeker’s Allowance, though not housing benefit.

Last year, RPI peaked at 5.6 % in September, meaning tenants faced rent hikes of 6.1 per cent before rent convergence.  However, some landlords, including several local authorities, chose not to apply the full increases last year.

The figure this year is likely to mean only a very small number of councils or housing associations will elect to limit rent increases.

Waqar Ahmed, finance director at London & Quadrant, said that the lower RPI figure was good news for developing landlords as it also put a brake on costs.  He went on to say “Our business plan has always been based on a low assumption about inflation.  If it’s around 2.5%, we are happy with that but whether it’s 1% or 5% isn’t the issue; the issue is how we can control our cost base within that.”

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