Consultation on how to implement Social Rent convergence

Overview

Topic of this consultation:

This consultation seeks views on how to implement Social Rent convergence, as part of the government’s 10 year rent settlement for social housing.

This follows the broader consultation on future social housing rent policy that the government carried out between October and December 2024.

Scope of this consultation:

Following the previous consultation, the government announced (as part of the Spending Review) that there will be a 10 year rent settlement for social housing from 1 April 2026 in which rents will be permitted to increase by CPI+1% per annum.

However, the government received clear feedback in response to the previous consultation that the level of investment in new and existing social housing that is needed to deliver the government’s ambitions will not be unlocked unless Social Rent convergence is implemented.

Convergence would allow rents for Social Rent properties that are currently below ‘formula rent' to increase by an additional amount each year, over and above the CPI+1% limit, until they ‘converge’ with formula rent. Formula rent refers to the formula that is used to calculate the rent that may be charged for a given property when it is let to a new tenant. A convergence mechanism was originally introduced in 2002 but was scrapped in 2015.

The government therefore confirmed at the Spending Review that it will implement a convergence mechanism as part of the new rent settlement. The details of precisely how, and at what level, this mechanism will be implemented will be confirmed at Autumn Budget later this year, taking account of the benefits to the supply and quality of social housing, the impact on rent payers and the impact on the government’s fiscal rules. To inform that decision, this consultation focuses on how convergence should be implemented.

Once that decision has been made, the Secretary of State intends to direct the Regulator of Social Housing to set a standard on rents that will apply to Registered Providers of social housing. This comprises:

• Private Registered Providers (including housing associations that are Private Registered Providers)
• Local Authority Registered Providers (i.e. local authorities with retained housing stock)

Section 197 of the Housing and Regeneration Act 2008 gives the Secretary of State the power to direct the Regulator of Social Housing to set a standard on rent, and about the content of that standard. Once issued, a Direction is binding on the Regulator. We propose to use this power to issue a new Direction to the Regulator on rent, and to revoke directions on rents that were issued by the previous government in 2019 and 2023.

We published a draft Direction and an accompanying draft policy statement alongside the previous consultation in 2024. We are publishing updated drafts of both documents alongside this consultation. These updated versions reflect the decision to implement Social Rent convergence (although this consultation is seeking views on how this should be implemented). They also incorporate a number of minor and technical changes, following feedback received in response to the previous consultation.  

Geographical scope:

The proposals will apply to rents charged by providers registered with the Regulator of Social Housing. They will therefore mainly affect tenants of social housing in England.

Why your views matter

We are gathering evidence from tenants, landlords, lenders, investors and other organisations associated with the social rented sector with views on the implementation of a social rent convergence mechanism. 

If you can provide us with information on this subject, please complete the survey.