Social rents set to rise by up to 4.1 per cent, the largest rise in a decade

Social rents in England can be increased by up to 4.1 per cent from April 2022, the Resolution Foundation said in its Housing Outlook Q4 2021, published on 22 December 2021. The figure follows the September 2021 inflation peg: CPI inflation was 3.1 per cent in the year to September 2021, and social rents can currently be uprated by a maximum of CPI plus 1 percentage point each year¹.

The think tank said the 4.1 per cent rise would be the largest for a decade and would inflate the average social renter family's rent by £202 per year¹. It is a ceiling on increases rather than a requirement, but the report said it "seems very likely that the majority of housing providers will apply the full amount" given four years of falling rents and rental income from 2016¹.

The cap has changed repeatedly. From April 2002 until March 2015, annual social rent increases were capped at the Retail Price Index plus 0.5 percentage points. In 2015-16 the system changed so rents could rise by up to CPI plus 1 percentage point, a settlement abandoned a year later when the Government announced social rents would fall by 1 percentage point for the subsequent four years. In April 2020 social rents returned to being uprated by a maximum of CPI plus 1 percentage point, an arrangement due to last until April 2025¹.

Source: Resolution Foundation, Housing Outlook Q4 2021¹

Why it matters for households

The report estimates there are 4.75 million social renter families in England, and that 56 per cent receive some form of benefit support with their housing costs, leaving 44 per cent paying their rent in full¹. Those paying in full would absorb the entire increase themselves. The report adds that social renters in London, the South East and the South West are less likely to receive housing cost support than those elsewhere, and so are likely to be harder hit¹.

Housing costs have already been taking a larger share of social renters' income. Social renters spent an average of around 15 per cent of income on housing costs between 2002 and 2012 even after housing benefit is taken into account, rising to 19 per cent by 2019-20, equivalent to £786 per year extra rent for the average social renter family. Private renters spend significantly more of their income on housing, but this has remained steady at around 31 per cent¹.

State support has covered less of the bill over time. Average housing benefit covered 52 per cent of average housing costs for social renters in 2002; by 2019 this had fallen to 43 per cent¹. Between 2002 and 2019, the share of social renting family units in England with at least one member in employment rose from 36 per cent to 46 per cent¹.

The report sets the rent rise against other pressures due in April 2022: average gas and electricity bills are predicted to rise by as much as 50 per cent when the energy price cap is raised, the Bank of England anticipates consumer price inflation will peak at 6 per cent the same month, and National Insurance contributions rise in the new financial year¹. It notes that 4.1 per cent outstrips the OBR's estimate for 3.6 per cent growth in household disposable income per capita over the same period, while the OBR forecasts private and social rents together to increase by 2.3 per cent in 2022-23¹.

What happens next

The CPI plus 1 percentage point arrangement is due to last until April 2025¹. The report says the pandemic-era support measures, including the Job Retention Scheme, the £20 per week uplift to Universal Credit and extra support through Discretionary Housing Payments, have largely ended as the April pressures emerge. Government funding for DHPs was boosted by £40 million between 2019-20 and 2020-21, reaching a total of £180 million, with 94 per cent of the allocation spent by local authorities¹.