BUDGET 2015: Housing associations will have to cut rents for social housing by 1% a year for the next four years.
Chancellor George Osborne’s summer Budget move follows the government’s extension of right-to-buy to housing association tenants, and will further constrain their ability to deliver more social housing.
Osborne said: “I’m confident that housing associations and other landlords in the social sector will be able to play their part and deliver the efficiency savings needed.”
The Budget document points out that this will mean a 12% reduction in average rents by 2020-21 compared to current forecasts.
The reduction in rents is a U-turn for the Conservatives who, when in coalition in 2013, pledged that from 2015-16 social rents would rise by the consumer price index plus 1 per cent each year for 10 years.
Dr Anthony Lee, senior director at BNP Paribas Real Estate, said: “The government’s plans to reduce rents paid by tenants will have an adverse impact on both housing associations and developers.
“Social housing rents have – until now – increased annually by RPI plus 0.5% pa, underpinning housing associations’ business plans and making social housing an attractive investment proposition. This announcement is likely to undermine housing association finances and risks making bond issues less attractive.”
