How are tenant rents set?

There have been numerous changes to Government policy, funding and terminology in the last 15 years, and we know it can be confusing. We’ve pulled together this glossary of terms and key events to help explain how we set and increase our tenants' rents today. 

  • What is social housing?

    ‘Social housing’, often called ‘council housing’ or ‘social rented housing’, is a type of low-rent housing for people who are most in need or struggling to pay for their home.

    ‘Social housing’ is managed by registered providers like housing associations and local authorities. Residents must be referred to the provider through their local council, by registering on a housing waiting list.

    At Notting Hill Housing, we house residents in permanent rented housingindependent living 55+ or housing with care and support.

  • What is social rent?

    'Social rent' is government-subsidised rent for people on low incomes. Today, 'social rent' is an umbrella term that often refers to 'target rent' or 'fair rent' (see below for details).

     

  • What is target rent?

    In the 90s, 'social rent' (see above) levels varied tremendously between social landlords, so in April 2002 the government introduced a new process for setting rent for all 'social housing' residents, as a way to guide the rents gradually to the same level.

    The new process, called 'rent restructuring', aimed to even out rents for similar properties in the same area by setting a 'target rent'.

    The formula for calculating 'target rent' is related to the market value of a home and average earnings in the local area. To protect residents in high value areas, the formula is capped according to the number of bedrooms in a home.

  • What is fair rent?

    If you have a 'secure tenancy' (one issued prior to January 1989), you pay what is called a 'fair rent', another sort of 'social rent'. This is set by the Valuation Office Agency rather than the 'target rent' formula, but it will never be higher than the 'target rent' for your home (see above).

  • What is affordable rent?

    The government introduced 'affordable rent' in 2011 to help fund the building of new homes in England. The level of affordable rent can be up to 80% of the private market rent in the local area (including service charges).

    This is higher than social rents but, in order to minimise the impact on our residents, we set our affordable rent levels at the lowest of the following three values:

    • 80% of market rent in the area
    • The Local Housing Allowance (LHA), which defines housing benefit limits for people who rent a home from a private landlord
    • Our own capping levels, which are reviewed annually by our Board to help ensure rents are as affordable as possible, while still allowing us to manage our homes and develop new ones

    Approximately 10% of all our social rented housing properties are rented at affordable rents, as of March 2015. From 2014-15 we let our affordable rent properties at an average of 67% of the market rent.

  • What is intermediate market rent?

    'Intermediate market rent' is a discounted rent scheme designed to help working households who cannot afford to rent a home on the open market and do not qualify for social rented housing.

    Some of our intermediate market rent schemes (see community housing) were developed specifically for key workers, and some to help people use the discounted rent to save towards home ownership.

    Intermediate market rents are set at 80% of the market rent value, including service charges. No caps are applied to any of these rents.

  • What is market rent?

    'Market rent', also called 'private rent', is based on the open market, or the average private rent level for similar properties in a specific area, and operates in a very similar fashion to a regular high street agent.

    Private rent generally attracts the average tenant and those who do not qualify for subsidised housing. Our private rent division is called Folio London.

Changes to your rent 

We increase rents in response to inflation (measured by the Consumer Price Index - CPI), in order to ensure we can meet the costs required to manage and maintain our properties.

Learn more about how rent increases are calculated and what this means for you below.

  • How will my rent change?

    Rents for social rented housing change each year by a formula set by the Government. From April 2016 the Government formula to be applied to your rent will depend on the type of property that you live in. If you live in our supported housing or in a housing co-operative you will receive a 'rent increase'. If you live in our permanent rented housing you will receive a 'rent review' which will apply a 1% decrease to your rent.

  • How are rents increased?

    If you live in our supported housing or in a housing co-operative you'll receive an annual rent increase.

    The Government formula used to increase social rented housing is based on the Consumer Price Index (CPI) which measures inflation, and is [CPI + 1%]. The previous September's CPI is used to calculate rent increases (-0.1% in September 2015).

    This is the formula to calculate rent increases:

    [Your current rent] + [CPI + 1%] of your existing rent = Your new rent

  • How are rents reviewed?

    If you live in our permanent rented housing you'll receive an annual rent review. 

    The Government formula used to review social rented housing is to reduce your rent by 1%. This is the formula used to calculate rent reviews:

    [Your current rent - 1%] = Your new rent

  • Are there any rent caps?

    We do not charge social rented housing tenants more than the regulator-approved social rent cap for their properties.

    Fair rents for secure tenancies will never exceed what the Valuation Office Agency says is a fair rent for your home.

  • I pay a social rent now – will I be moved onto 'affordable rent'?

    You will not be moved onto affordable rent unless you choose to move home, in which case you will pay the advertised rent for that property, which will be included in the advert.

  • Booklets to download

    You can read about how we set rents in more detail in the booklets below. 

    If you're a permanent rented housing tenants, download: 

    Understanding your rent review 2016

    If you're a supported or co-op housing tenants, download: 

    Understanding your rent increase 2016