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.

This content applies to England

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. 

The limit on annual rent increases for 2021-22 was published on 3 December 2020 by the regulator of social housing. The document contains adjusted tables to help providers ensure that they use the correct annual percentage to inflate their rent.

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 applies only to the rent element and not to service charges. [6]

Exceptions to and exemptions from the requirement to reduce the rent are set out in regulations, and include: [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 are 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

Footnotes

  • [1]

    s.24(1) Housing Act 1985.

  • [2]

    Guidance on Rents for Social Housing, DCLG, May 2014.

  • [3]

    Ch.2 Guidance on Rents for Social Housing, DCLG, May 2014.

  • [4]

    s.24(2) Housing Act 1985.

  • [5]

    s.23 Welfare Reform and Work Act 2016; Welfare Reform and Work Act 2016 (Commencement No.1) Regulations 2016 SI 2016/394.

  • [6]

    reg 16 Social Housing Rents (Exceptions and Miscellaneous Provisions) Regulations 2016 SI 2016/390.

  • [7]

    Social Housing Rents (Exceptions and Miscellaneous Provisions) Regulations 2016 SI 2016/390.

  • [8]

    reg 3 Social Housing Rents (Exceptions and Miscellaneous Provisions) Regulations 2016 SI 2016/390, as amended by Social Housing (Exceptions and Miscellaneous Provisions) (Amendment) Regulations 2017 SI 2017/91.

  • [9]

    ss.102/103 Housing Act 1985.

  • [10]

    Direction on the Rent Standard 2014, DCLG, May 2014; ch.4 Guidance on Rents for Social Housing, DCLG, May 2014.