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A new rent standard from April 2020

09 December 2019

Since April 2016, social landlords, like Network Homes, have been required by the government to reduce rents by 1% each year. This will change on 1 April 2020, as from this date social landlords will be allowed to increase rents each year. As part of the change, we’ll be allowed to increase rents by up to 2.7%.

Our Board is currently deciding whether to increase rents, and if so by how much. They’ll make a decision in January 2020 and we’ll let our residents know after this if they’re going to be affected by the change. If you’re going to be affected, we’ll send you a letter explaining the changes to your rent.

What are the new rules about rent increases?

The new rules from government state that we may increase rents by the Consumer Price Index measure of inflation, plus 1%. The Consumer Price Index (or CPI) is a measure which tracks how much the prices of consumer goods and services are increasing, recorded by the Office for National Statistics.

The relevant Consumer Price Index measure is taken from September of the previous year, so for 2020 the relevant measure is from September 2019. CPI in September 2019 was 1.7%, which is why rents may increase by 2.7% in 2020.

We don’t know what the CPI will be in future years. The Bank of England has a target to keep CPI at around 2%, so we expect the limit on rent increases in future to be around 3%.

Why use CPI?

CPI shows how much the prices of goods and services are increasing. As prices increase, each pound we receive in rent becomes less valuable, because it pays for fewer goods and services. This means that to keep running our services, we need rents to keep up with CPI inflation.

Increasing rents by CPI + 1% means we can add 1% to whatever the percentage CPI is. The extra 1% means we can go beyond maintaining current services – it allows us to build new homes, keep current homes in good condition, and invest in communities.

Does this affect my service charge?

This potential increase is to your rent only and does not apply to your service charge. We calculate your service charge separately based on an estimate of the amount we anticipate spending on providing services or works to your building over the financial year.