Issue - meetings

Decision

That Cabinet approve the inclusion of rent convergence in the Housing Revenue Account rent setting proposals from 1 April 2027.

Reasons for the decision

It was recommended that Cabinet approve the inclusion of rent convergence in the rent setting proposals from 1 April 2027 due to additional income that would be generated. which would support the HRA in meeting the financial challenges it was facing.

Other options considered

The Council could have chosen to set rent below the levels set out in the rent standard but this would have had an impact on the resources available to invest in the existing housing stock and the future financial resilience of the HRA.

Decision

That Cabinet approve the inclusion of rent convergence in the Housing Revenue Account (HRA) rent setting proposals from 1 April 2027.

Other options considered

The Council could have chosen to set rent below the levels set out in the rent standard, but this would have had an impact on the resources available to invest in the existing housing stock and the future financial resilience of the HRA.

Reasons for the decision

Cabinet approved the inclusion of rent convergence in the rent setting proposals from 1 April 2027 due to additional income that would be generated, which would support the HRA in meeting the financial challenges it was facing.

Following a consultation in 2025 on Social Rent Convergence the Government published its policy statement on rents for social housing in January 2026 confirming that rent convergence would be implemented from April 2027. This, combined with the announcement in 2025 that social landlords would be permitted to increase rents by the Consumer Price Index (CPI) + 1% every year for 10 years from April 2026 to March 2036 had provided more certainty to the sector in being able to plan for investment to continue to improve the quality of existing homes alongside investment in housebuilding.

The Government directed The Regulator of Social Housing to set a rent standard from 1 April 2026 which reflected the Government’s 10-year rent settlement. Social landlords must comply with the requirements and expectations set out in the rent standard and the rent policy statement. The standard sets out that:

• Social landlords would generally be allowed to increase rents for social and affordable rent homes by up to CPI + 1% each year.
• Landlords would be able to further increase the weekly rent on social homes that were currently below ‘formula rent’ by an additional £1 per week from 1 April 2027 and an additional £2 per week from 1 April 2028 until formula rent was reached.

Formula rent was a method set by the Government for calculating social housing rents in England which was introduced to ensure a consistent approach across the sector in calculating rents. Formula rent was increased annually by CPI + 1%; this had resulted in differences between formula and social rent. For example, the increase in social rent in 2023/24 was capped at 7% due to the cost-of-living crisis whereas formula rent increased by 11.1%. The aim of rent convergence was to gradually increase rents each year until they aligned with formula rent.

The Council was currently undertaking analysis to calculate the additional income that would be received if rent convergence was included in the rent setting proposals from 1 April 2027. Initial estimates were that rent convergence in year 1 would generate an additional £300,000 for the Council, which was a significant addition to the annual income for the Housing Revenue Account (HRA) which would contribute towards stabilising the revenue account. Once formula rent was established, officers would need to discover how many housing tenants would be impacted.