Housing association rents

Housing associations are charitable organisations whose mission is to provide affordable, good quality housing. The majority of housing association homes are let for social rent - on average around 50% of market rent - but housing associations provide a range of different types of rented housing including supported housing, shared ownership, affordable rent (up to 80% of market rent) and cross-subsidy market rent.

Rent is the main source of income for housing associations. This does not generate profits – rent paid to housing associations is re-invested into homes and services. Rent funds a wide range of housing association work including maintenance of existing homes, delivering services for residents and communities, upgrading and decarbonising homes, and building desperately needed new homes.  

Since 2001, social rent has been set according to a government formula. This creates a ‘formula rent’ for each home, based on the relative sale value and size of the home, and relative local income levels – with the intention that similar rent is charged for similar social homes. The link to local incomes helps to keep social rents affordable.

The government then sets the maximum annual permissible changes for these rents by issuing a Direction to the Regulator of Social Housing, to update the Rent Standard. This is commonly known as the ‘rent settlement’. The current rent settlement runs for 10 years from April 2026 to March 2036, with rent increases capped at CPI+1% each year.

The government has provided information about the limit on annual rent increases from 2026.

In the final Policy Statement on rents for social housing and the Direction to the Regulator, the government has also made a set of other minor and technical changes in response to points raised in the consultations on future social housing rent policy and rent convergence.

These are listed in full in the consultation response.

Rent convergence

In 2002, the government introduced a policy of ‘convergence’ to bring the rent of all social homes in line with the ‘formula’ rent over time. This was to address historic differences in rents across similar social homes that resulted from their having been built in different time periods, regulatory and financial environments. In 2015, the government abandoned the policy of convergence, which means the rent on some social homes is lower than formula rent. In 2023/24, 71.4% of homes paid social rents that were below formula rent.

Following calls from the NHF, its members and other stakeholders, rent convergence will be reintroduced from April 2027 with a permitted maximum increase of £1 per week (i.e. £52 per year) on top of CPI+1%, rising to £2 per week on top of CPI+1% from April 2028 onwards, until they reach the formula level.  

It is important to note that convergence is up to the level set by the formula, not the formula plus rent flexibility (of 5% or 10%). The rent flexibility continues to apply to new lets, as it has in the past. 

In arriving at this decision, the government has carefully considered the impact on rent payers and public spending, as well as the sector’s ability to invest in new and existing social homes. 

Resident affordability

Housing associations believe that everyone should be able to live in a good quality home that they can afford. Rent-setting is a complex balancing act that needs to ensure housing associations are providing affordable housing to residents while maintaining the financial capacity to deliver good quality homes and services, meet strategic challenges (such as decarbonisation) and build the new homes our country so desperately needs.

The NHF and housing associations do a significant amount of work to improve the incomes of social housing residents. This includes work to improve the welfare system, improve residents’ employment outcomes and to lower energy bills. 

Related

• Finance Policy Advisory Group
• NHF Spending Review Submission - February 2025
• Rent convergence consultation