Local authority rent and rent increases
Local authorities charge their tenants reasonable rents to ensure that similar rents are paid for similar properties and periodically review rent levels.
Rent levels set by local authorities
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.
Rent increases and variations
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]
Exceptions to reasonable rents
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
Last updated: 26 April 2021