Hikes will be capped at inflation plus 1% for five years from 2020

The government is capping social housing rent increases as part of its additional £2bn investment for affordable homes.

Increases will be capped at inflation (CPI) plus 1% for five years from 2020. The previous rent settlement was CPI plus 1%, intended to run for 10 years from 2015, but this was changed in favour of a four-year 1% cut from 2016.

The department of communities and local government claims this will provide social tenants, councils and housing associations with the ”security and certainty they need”.

Previously, the government’s affordable housing policy primarily supported ‘affordable rent’ – rents of up to 80% of local market level – and low-cost home ownership.

The new announcement now extends support for ‘social rent’ – which are lower rents set according to national guidelines.

It comes alongside the government’s plans to increase funding for affordable homes by a further £2bn to more than £9bn.

The number of homes will be determined on type and location of housing, and bids received for funding. It said that with a typical £80,000 subsidy, the new £2bn investment can supply around 25,000 additional homes at rents affordable for local people.

It added this new funding could lever in total investment by housing associations and councils of up to £5bn

The department said: “These latest measures reinforce this government’s approach to back housing of all tenures – with more social housing; extra security for those in the private rented sector; and helping people get onto the housing ladder.”

Stephen Teagle, chief executive of Galliford Try Partnerships, said the announcements now provide the sector with the momentum to build the new homes that are required.

“The announcements by the Government of an inflation-linked rent settlement and additional capital expenditure is excellent news for people waiting for an affordable home. It gives the sector a framework of certainty for the next 5 years, will encourage further private investment and allow RPs and Local Authorities to kick-start their building programmes.

“The sector now has the political tail-wind and confidence required to implement business plans and commit to building the homes we need.”.”