It seeks to do this while maintaining affordability by keeping increases in check and below the level of market rents.
Housing associations must develop their understanding of the operation of the local housing markets in determining how they adjust to target rents. Affordability remains central to meeting housing needs, although many associations have publicly questioned how they can keep their rents affordable within the rent restructuring requirements.
Getting rents right? provides a picture of rent and affordability policies among associations prior to the new restructuring requirements, and sets out practical approaches to measuring the affordability of rents.
In doing so, it clarifies some of the ways in which social landlords might use the Housing Corporation's rents guides, CORE data and other readily available sources to assess affordability as one element of their approach to rent levels.
Although the majority of associations state that affordability is an important goal, most have not used affordability measures as such.
Instead they have often looked to their peers' rents or to tenant feedback.
This approach is circular and relative. It assumes that someone else has successfully determined what is affordable – and this is not necessarily the case. The blind may well have been following the blind.
Just as associations are now complaining that they will not be able to keep rents affordable under the new regime, in the past they complained that it was not possible to measure affordability because of the lack of a formal definition.
In addition, they cited the difficulty of balancing the need for affordable rents with the constraints of business plans. Regardless of how rent setting is determined, the government's definition of social housing – the provision of accommodation at sub-market rents – has not changed. So affordable rent setting needs to take private as well as public markets into account.
Getting rents right? sets out a four-stage approach to assessing affordability, based on associations looking to local markets to get a more realistic idea of whether their rents are affordable, before evaluating their position with respect to specific measures.
The corporation's Guide to local rents 2001 report is central to this approach. Published annually, the report provides tables of detailed rents charged by associations and a comparison of their average rents with those of private rented and local authority tenures. This is done for each local authority area.
Taken with the University of Cambridge's Dataspring and CORE, these reports give the basics for developing local affordability policies in line with the four stage approach:
Stage one: Housing associations should start by looking at their own rent levels and structures and then at others in the locality. Guide to local rents 2001, part II provides the data for this analysis.
Stage two: Housing associations should compare their rents to those in the local authority and private sectors. Guide to local rents 2001, part I provides the material evidence for this comparison.
The comparison between an association's rents and local authority rents is important. If RSL rents are significantly higher, households not eligible for housing benefit may leave the sector in search of lower rents.
Comparison with owner-occupation costs is also desirable. In areas where private rents and owner occupation costs are low, and social rents are high in comparison, associations are not meeting their obligations. In such cases, tenants may choose to move to other sectors.
Just as importantly, where private rents and costs are high, associations should know how wide the gap is. Those with incomes high enough normally to bypass the social sector may not be able to access the private sector market at reasonable cost.
Stage three: Housing associations should look at household characteristics, particularly income, to clarify the impact of rents on affordability. CORE data provides an easily accessible data source in this context.
This is particularly important because associations may choose to adjust rent or allocation policies to ease affordability for specific property sizes or household types.
Analysis of the impact of rent restructuring on affordability highlights the fact that the real burden of rent rises will fall on the smaller property sizes, particularly bedsits (see table).
This has implications for affordability, since single people most frequently occupy bedsits. It also shows that that among those on low incomes, single people are the most vulnerable in terms of housing affordability.
They are also the most significant household type accommodated by associations and their proportion among tenants is increasing.
Stage four: Housing associations should determine what an affordable rent might be. Getting rents right? demonstrates three ways of doing this, each of which provides a different perspective.
By taking into account rent levels, earnings and the interaction of benefits with wages and rents, this type of analysis can show the impact of current rent levels on affordability for tenants and how this will change over the planned rent restructuring period.
For the RSL sector in general, affordability is likely to be improved by the change to target rents. But finer analysis suggests problems for some household types and in some geographical areas.
Associations need to understand how this affects their tenants and stock to ensure that they are positively contributing to the provision of affordable housing in specific localities and are not blindly applying formulae in the same way that they previously followed rent patterns determined by their peers.
Getting rents right? £10; Guide to local rents: parts I and II, £25. Housing Corporation. Tel: 020 7393 2228.
Source
Housing Today
Postscript
Dawn Marshall is a research associate at the University of Cambridge Centre for Housing and Planning Research.
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