Local authority rent and rent increases

Local authorities have the power to determine their own rent levels, but must charge reasonable rents for tenants in its own housing stock.[1]

A local authority must also take account of Government guidance and the Rent Standard as set by the regulator of social housing when setting rents.[2]

The requirement to charge reasonable rents applies to most secure, flexible and introductory tenancies, exceptions are set out below.

Reasonable rents are set by a reference to a formula.[3] The aim of the formula-based approach is to ensure that similar rents are paid for similar properties. The current formula is devised on the basis that rents take account of:

• the condition and location of a property

• local earnings

• number of bedrooms in a property

A local authority's decision on rent levels is only challengeable by judicial review, however the courts are often reluctant to interfere with authorities' decisions.

Local authorities must review rents from ‘time to time’.[4] In practice, most local authorities vary rents annually. 

Each year the Government and the Regulator of Social Housing publish guidance on how to adjust the formula to the new annual Consumer Price Index and calculate rent increases using the correct annual percentage to inflate their rent:

• limit on annual rent increases for 2021-2022 (from April 2021)

• limit on annual rent increases for 2022-2023 (from April 2022)

Social rent reduction

From 1 April 2016 local authorities were required to reduce rents by 1 per cent in each of the subsequent four years.[5] The government published guidance about social rent reduction. The reduction applied only to the rent element and not to service charges. [6]

Exceptions to and exemptions from the requirement to reduce the rent were set out in regulations, and included: [7]

• temporary social housing and short-life leasing schemes for the homeless

• residential care homes or nursing homes

• certain specialised supported housing developed in partnership with councils, local health or social services offering a high level of support for clients, for whom the only alternative options are care homes

From 1 April 2017, the following were also exempt:[8]

• domestic violence refuge accommodation

• almshouse accommodation

• accommodation provided by a co-operative or fully mutual housing association

• accommodation provided by a community land trust

Notice of variation

The local authority must serve a notice of variation on each tenant at least four weeks before the date on which the rent change takes effect. The local authority must consult with tenants before serving a notice of variation to the terms of a secure tenancy.[9]

Affordable rents

Local authorities can charge affordable rents of up to 80 per cent of the market rent where they have an agreement to provide new homes under an affordable homes programme.

Tenants with high incomes

From April 2015 local authorities can charge market rents to tenants with an annual household income of £60,000 or more.[10]

In its guidance the Government advises that:

• in calculating household income only the income of the tenant, and their spouse, civil partner or cohabitee are to be taken into account

• the rent should be reviewed if the household is subject to a sudden and ongoing loss of income