How Are Our Rents Calculated?
Here we will explain how rents are calculated for our social housing rented homes only. There has been a change in the past few years so we would like to explain this first.
Changes To Rent Calculations
Prior to 2015 we were always allowed to increase rents, with the amount of the increase dependant upon inflation and Government decisions. However, the Welfare Reform and Work Act 2016 required Housing Associations to reduce their rents by 1% a year for 4 years from 2016. This decrease period has now come to an end and the Government has advised rents can be increased from April 2020.
- The formula for calculating Housing Association rents is set by the Government. They tell us the maximum we can charge. If you are interested in reading more about this, you can view the Government Policy Statement document for April 2020 by clicking here.
- The majority of Housing Associations use the September Consumer Price Index (CPI) rate plus a percentage allowed by the Government. These two combined figures make up the overall percentage increase.
For 2020-21 we have calculated the rent increase by using the September 2019 CPI figure of 1.7% plus 1%. Most of you will therefore have a 2.7% increase in your rent.
What Will Happen In April 2020?
The Government has told us that we can begin to increase rents again from April 2020, at a rate of CPI plus up to 1%. Our Board decided that to keep the business running and meet residents’ priorities, we will increase by the maximum which is 2.7% (September 2019 CPI 1.7% plus 1%). Most of you will therefore have a 2.7% increase in rent.
However, the rent type you have determines what the overall change will be as each of them are calculated differently. If you have:an affordable rent, a social rent or a fair rent then please see the relevant section below under 'How Will My Rent Change?'
If you do not know what rent type you have, you can check your tenancy or your rent statement on My Estuary. Alternatively, feel free to contact us on 0300 304 5000 where we will be happy to help you.
- The following table shows what the 2.7% increase means for a range of example rents:
|Current Rent||Rent From April 2020|
How Will My Rent Change?
How Will My Rent Change?
If You Have An Affordable Rent
If you have an affordable rent, any changes are calculated in a different way, but only if you also pay a service charge. If you do not pay a service charge, your rent will increase by 2.7%. However, there are some exceptions to this where a new tenancy was granted within the last 52 weeks.
- If you do not know what rent type you have or if you pay a service charge, you should check your tenancy agreement. Alternatively, Alternatively, please feel free to contact us on 0300 304 5000 where we will be happy to help you.
Where you have an affordable rent and pay a service charge, we must include both elements when calculating your new rent. In other words, we must add the rent and service charge elements and treat this as one amount. Then we must multiply this by the increase (2.7% for 2020-21). Once we have worked this out, we deduct the cost of your service charge, and this gives us your new rent.
For instance, if you have a rent of £150 per week and a service charge of £20 per week, the sum would be £150 + £20 = £170,
- £170 + 2.7% = £174.59
- £174.59 - £20 = new rent of £154.59.
Where you pay a service charge, this element can either increase or decrease. Each year we estimate the cost of the services and this figure is set for the whole year, despite how much we spend. This is called a fixed service charge.
When you receive your personalised rent increase notification, this will give you a breakdown of your new rent and service charge, if you have one,
If You Have A Fair Rent
If you have a fair rent, your rent only changes once every two years. If you are due a change in April 2020, your rent will be increased.
Where there have been no major changes to the property, your rent is subject to the Maximum Fair Rent legislation.
- The Maximum Fair Rent calculation is based on the existing registered rent multiplied by a figure.
- This figure is based on the change to the Retail Price Index from the last registration to the current registration plus 5%. Then it is rounded up to the next 50 pence.
The Maximum Fair Rent calculation works out more than the Consumer Price Index (CPI) + 1%, so for fairness and consistency we will only be increasing your rent by 2.7%.
If you also pay a service charge, this may either increase or decrease. Each year we estimate the cost of the services and this figure is set for the whole year, despite what we spend. This is called a fixed service charge.
When you receive your personalised rent increase notification, this will give you a breakdown of your new rent and, if you have one, your service charge,
If You Have A Social Rent
If you have a social rent then this will increase by 2.7% from April 2020. However, there are some exceptions to this where a new tenancy was granted within the last 52 weeks.
- If you do not know what rent type you have or if you pay a service charge you should check your tenancy agreement.
If you also pay a service charge, this could either increase or decrease. Each year we estimate the cost of the services and this figure is set for the whole year, despite how much we spend. This is is called a fixed service charge.
When you receive your personalised rent increase notification, this will give you a breakdown of your new rent and, if you have one, your service charge.
How Have The Rent Decreases Affected Us?
How Have The Rent Decreases Affected Us?
The Impact Of Rent Decreases Since 2016
The decision to increase rents by 2.7% will allow us to keep the business running and meet resident's priorities.
The rent decrease since April 2016 has meant that we have had a lot less to spend in the last four years. While your rent decreased, the same cannot be said for the services we provided for you. However, the cost of goods, materials, equipment and specialist contractors all increased, so unfortunately we were unable to complete as many improvements as we had planned. Like everyone, we had to make less money stretch further than we have had to before.
- The example in the table below shows the impact on our income for just one home over the four years of rent decreases. However, we believe we have potentially lost £2 million in our future turnover.
- This example shows us that a starting rent of £106.09 during 2015/16 would have decreased to £105.03 in the following year. If it had increased instead (at an assumed rate of CPI 2% plus 1%), the rent would have been £109.27 for 2016/17. The difference between what the actual rent is and what it potentially could have been is £17.50 per week. Therefore over the four years of rent decreases, this one home reduced our income by £2251.60.
|1 April 2016||£105.03||£109.27||-£220.48|
|1 April 2017||£103.98||£112.55||-£445.64|
|1 April 2018||£102.94||£115.93||-£675.48|
|1 April 2019||£101.91||£119.41||-£910.00|