We know there was a lot of talk after the Government’s spending review so we’ve asked our External Affairs Manager, Yoric, to break it down for us!
How does this affect me?
Most of you probably weren’t hanging on the Chancellor’s every word in her Spending Review speech last week, and why would you be? It was largely a tsunami of huge numbers and technical terms. You might have been wondering how all this affects you and your community. In this blog, we’ll try to unpack some of the announcements and what they mean for you, me and Midland Heart as a whole.
This was a really important spending review for the sector. The government had been promising several announcements about the amount of money the sector will get to build new homes and how much your rents will rise over the coming years.
Affordable Homes Programme
Firstly, the Affordable Homes Programme, the way the government funds the building of new affordable housing, was increased to £39 billion over the next 10 years - £3.9 billion per year. For context, the current programme is only worth £2.3 billion per year, for only five years, although it has been boosted by this government. Clearly, this represents a significant investment in affordable housing. The significantly increased amount and time period provides housing associations with more certainty to plan our investment and increased ability to borrow money from private lenders and investors, so we can build even more homes.
Rent increases
Secondly, the government has announced that housing associations and councils will be able to increase social rents by Consumer Price Index (CPI) inflation plus 1% for the next ten years. So, if CPI inflation is 3% in the preceding September, social rents can increase by 4% from the following April. Again, this means that we know, more or less, what our income from rents will be for the next ten years. It also gives you a good idea of what your rent will increase by each year.
Rent convergence
Thirdly, the government will be consulting on ‘rent convergence’. This is where it gets a bit more technical, but stick with me!
The government has a formula for setting social rents. Because the government limits how much we can increase these rents by, for good reasons, many of the rents we charge are lower than the ‘target rent’ would be if it was worked out using the formula. The government wants to consult on the best way to get our rents back up to the ‘target rent’ by gradually increasing some rents by more than the CPI+1% (see above).
Although an increase in rent would help us to build more affordable homes, we’re mindful that doing this could mean raising your rents by a higher amount than we otherwise would. So, when the government launches the consultation, we’ll be asking you for your feedback so that we can include it in our response.
Closing the gap
There is also a gap between council rents and housing association rents and the government wants to close this gap. Because of this gap, at the moment two households living in a similar home, in the same area, could pay different amounts of rent.
The budget also contained announcements on how the government is going to fund the health service, councils, and local services.
Summing up
There is much to welcome in the speech, but also areas where we need to try and make sure the government is doing the right thing with the money it is spending. For example, allocating enough funding to the areas we work in and building the right mix of housing, for social, affordable rent, and shared ownership.
If you would like to, you can let us know what you think by joining us as an involved tenant where you can be part of shaping our services and have your feedback included in our responses when the government asks us what we think about their plans.
