Rent setting policy

2. Scope

2.1 The Rent Policy is established upon several principles depending on rent type.

2.2 In setting rents, B3Living will ensure it maximises income, secures rental income to meet the business plan commitments and remains viable, including; operating costs, investment / improvement programmes (subject to performance, wider economic factors, and customer consultation) and that it meets the loan repayment requirements of its lenders.

2.3 Where applicable, B3Living will ensure rents are set in line with formulae developed by Government for the social housing sector and approved by Regulator of Social Housing (RSH) within the Rent Standard of the Regulatory Framework. B3Living will also set rents in accordance with the most up-to-date guidance produced by the Department for Levelling Up, Housing and Communities.

2.4 B3Living will inform its tenants of how the rent has been set in the annual rent notification letter, one month prior to the new charge coming into force, and via information available on its website.

2.5 The B3Living Board of Management will review and approve any changes to rent setting on an annual basis.

2.6 B3Living will also ensure rents offer value for money and are affordable to existing and future tenants.

2.7 B3Living will inform all new and existing tenants of the potential impacts of any welfare reform measures, including those already introduced and any scheduled, on their income and rent payment liabilities. This will include any planned capping of housing assistance (Housing Benefit and Universal Credit) to Local Housing Allowance rates.

3. Aims and objectives

3.1 Rent Standard

3.1.1 B3Living is committed to meeting the requirements of ensuring a fair method of calculating social rents based on:

• The condition and location of properties
• Local earnings (to take account of affordability) and
• Property size and valuations

3.1.2 In line with the regulatory standard, B3Living may exempt the following categories from social rent:

• Properties let to high income social tenants (as determined by Regulations)
• Affordable Rent (properties let up to 80% of market rent)
• Shared ownership
• Intermediate rent

3.1.3 The current rent settlement, as set out in the Regulator’s of Social Housing’s Rent Standard, states that rents can increase by CPI (September previous to the April rent review) plus 1% for the period April 2020 to March 2025. This applies to all B3Living general needs (both Social Rent and Affordable Rent housing) properties. This rent increase limit does not apply to intermediate rents, specialist supported housing, shared owners or other exempt properties.

3.1.4 Where a social rent property is re-let to a new tenant the rent will be set in line with the Rent Standard, see section 3.2.1. Where an affordable rent property is re-let at affordable rent the rent will be rebased in line with this rent policy, see section 3.2.2.

3.2 Setting New Rents

3.2.1 Formula Rents (also known as target or social rents)

Social housing rents calculated using the regulatory framework formula (also known as target or social rents) will be calculated using the following formula, services charges will then be added.

The calculation for Formula Rents is:

• 70% of the average rent for the Housing Association sector x relative county earnings x bedroom weight.
• + 30% of the average rent for the Housing Association sector x relative property value.
• + Service charges.

The rent formula allows for Housing Providers to set general needs social rents within a maximum 5% tolerance of the “formula rent”, and 10% for supported housing. For those tenants with rents greater than formula rent plus tolerance Housing Providers can only increase their rents by CPI only. B3Living will ensure all social rents are set within the tolerance.

3.2.2 Affordable Rent

B3Living will let Affordable Rent properties (current fixed-term tenancies will be converted into lifetime tenancies).

Where B3Living develop new build properties for Affordable Rent and on completion of schemes, RICS approved valuations to confirm the market rent will be obtained. B3Living reserves the right to set initial rents at 80% of the gross market rents (known as Affordable Rents) considering property size, location and characteristics of the property.

Where the Affordable Rent is above the Local Housing Allowance (LHA) rate, B3Living will use the maximum LHA rate as a rent ceiling for new customers. However, where local market conditions demonstrate demand, B3Living reserves the right to set rents above the LHA rate.

According to the terms of funding arrangements agreed with Homes England, B3Living will convert suitable homes in order to increase rental income. Homes England will expect B3Living to invest this additional revenue directly into the provision of more affordable housing. We currently have a contract with Homes England to convert up to 496 social rented homes to Affordable Rent.

It is the responsibility of the Head of Housing Services to ensure B3Living does not covert more than allowed by our Homes England contracts.

3.2.3 Temporary Social Housing

There are approximately 5 temporary housing properties which are let at LHA rate. These are properties with tenancies that commenced prior to 1st April 2016, however we will work with our local authority partners to move these customers on to more secure tenancy agreement let at formula/target rent.

3.2.4 Shared Ownership

Specific exemption from rent restructuring is given for all shared ownership and low-cost home ownership properties provided by social landlords.

B3Living has a standard method for calculating the rent charge based between 2.50% and 2.75% of the value of equity held by the association following the sale of the first tranche. Consideration is given to affordability for the shared owners and the financial viability to the association in the design of the scheme which may lead to the 2.75% being varied.

Rises in rents are limited to the guideline of the RPI + 0.5% unless otherwise contained in the shared ownership lease.

3.2.5 Intermediate Rents

B3Living have very few properties where Intermediate Rents are applied, and specific exemption from rent restructuring is given for all intermediate rent schemes.

Our rent setting policy on these properties reserves the rights of B3Living to set rents at 80% of the current market rent. However, when 80% of market rent is greater than the Local Housing Allowance (LHA) rate, B3Living will use the maximum LHA rate as a rent ceiling for new and existing customers. However, where local market conditions demonstrate demand, B3Living reserves the right to set rents above the LHA rate.

3.2.6 Market Rents

B3Living have very few properties where Market Rents are applied.

B3Living will usually review market rents and associated service charges on an annual basis and will inform tenants of any changes in the rent in writing, providing at least one month’s notice. B3Living does, however, reserve the right to review and change market rents and service charges more frequently and will give those affected 28 days’ notice of any changes.

B3Living will calculate market rents based on a residential letting estimate for a property of the appropriate size, condition and area.
B3Living reserves the right to reduce market rents for vacant properties subject to demand and local market analysis.

3.2.7 Garage Rents

Garage are considered to be a non-social letting therefore rents will be charged, where applicable, at market rates. With the current pressures arising from the cost-of-living crisis, garage rents in 2023/24 should increase in line with the Rent Cap the Government applies to existing rented stock, rounded to the nearest 10p. However, the rents will be market tested in 2023/24 to inform the rent levels for 2024/25. Rents are charge without VAT to our tenants.

4. Rents Review and Implementation for all dwellings

4.1 The Board of Management has the ultimate responsibility for setting rents and the Executive Team has responsibility for reviewing the operational effectiveness of this policy on annual basis.

4.2 The rent review will usually be applied from the first Monday in April for all tenants. New tenants will be advised of the rent review when they sign their tenancy, so they are aware of the next rent review.

4.3 A minimum notice period of one month is required for notifying all tenants of the changes to their rent and service charges. As the reviewed rents and charges are due with effect from April, B3Living will begin informing tenants about their reviewed rent and service charges by the end of February/ beginning of March.

4.4 Tenants who wish to appeal against a rent review should use B3Living’s complaint process and must do so within 28 days of the new rent being charged. If the new rent has been charged for a period of 28 days no appeal against this can be accepted.

4.5 B3Living will follow the principles of section 13 of the Housing Act 1988 as amended by the Regulatory Reform (Assured Periodic Tenancies) (Rent Increases) Order 2003. Where the tenancy states section 13 does not apply, we will not serve section 13 notices to tenants when they are notified of a rent review.

4.6 B3Living will review the rents of new tenants on the first Monday of April even if this is less than 52 weeks since the start of their tenancy. This is to keep these rents in line with other tenancies, and provisions are contained within the tenancy agreement to allow this.

5. Garage Tenancies

5.1 Garage tenancies may be reviewed at any time during the year and only require one week’s notice. There is no limit on the frequency of rent reviews for garages.

6. Rent Increase Calculations

6.1 The information below provides a summary of the different rent increase rates being applied in 2024 to the differing rent tenancies used.

► Social Rent (existing tenants) – September 2023 CPI (6.7%) plus 1%

► Affordable Rent – September 2023 CPI (6.7%) plus 1%

► Temporary Social Housing – September 2023 CPI (6.7%) plus 1%.

► Shared Ownership rent – September 2023 RPI (8.9%) plus 0.5% or as directed by the shared ownership lease

► Intermediate rents – September 2023 CPI (6.7%) plus 1%

► Market rents – Market tested rents

► Garage rents – September 2023 CPI (6.7%) plus 1%

7. Equality, diversity and inclusion

There are no direct equality, diversity and inclusion considerations associated with this Policy.

8. Data protection and information security

Delivery of the rent policy will involve writing to all our customers to share information directly related to them. The process for sending information will require a Data Protection Impact Assessment to be undertaken.

9. Customer voice

The delivery of the Policy will require customer consultation. Customer’s feedback must be shared with the Board as a key consideration in the rent setting decision making process.

10. Compliance

► Housing Act 1985, Housing Act 1988 (as amended by the Regulatory Reform (Assured Periodic Tenancies) (Rent Increases) Order 2003)

► Housing Corporation – Rent Influencing regime ‘Implementing the Rent Re-structuring Framework - 2001

► Housing and Regeneration Act 2008

► Housing Corporation Regulatory Code Section 3.1 C Circular 04/06: Rents, Rent differentials and service charges for housing.

► HCA 2011-2015 Affordable Homes Framework.

► The Regulatory Framework for Social Housing in England from April 2012.

► DCLG – Guidance on rents for social Housing May 2014

► Welfare Reform and Work Act 2016

► The Social Housing Rents (Exceptions and Miscellaneous Provisions) Regulations 2016.

11. Linked policies, procedures and guidance

This policy is linked to the following policies:

► Lettings and Allocations Policy
► Income Collection Policy
► Fixed Term Tenancy Policy
► Flexicare Lettings Policy

12. Responsibilities

12.1 The Board of Management has the ultimate responsibility for setting rents and the Executive Team has responsibility for reviewing the operational effectiveness of this policy on annual basis.

12.2 As the process of setting the annual rent increase is a cross organisational project the Roles and Responsibilities are set out in detail within the Rent Setting Process Schedule which is reviewed annually.

12.3 The Head of Housing Services is responsible for the interpretation and communication of any legislative or regulatory changes and the impact to B3Living and to its tenants of such changes. The Financial Controller is responsible for the accurate calculation of Rents and Service Charges. The Head of Communications is responsible for informing customers of their rent increase within the timeframes set out in the Policy.

12.4 For rents set within the year, predominately due relating to new lettings, Financial Controller is responsible for providing the rents for all social rented properties and the Head of Housing Services is responsible for the setting of affordable rents for new development, rent conversions and re-let properties

12.5 New rents will be signed off by the Board of Management during its meeting in December each year for their subsequent implementation in the following April.