Rent convergence consultation

We have submitted our response to the government on how rent convergence should be implemented for the social housing sector.

Members helped us gather evidence to show how a £3 per week uplift would support housing associations to accelerate investment in new and existing homes. They also contributed to a more detailed modelling exercise.

Summary

• We welcome the government’s commitment to introducing rent convergence and encourage it to implement a £3 uplift, starting in 2026, that is embedded as a standing feature of social rent setting policy.
• Only a £2 or £3 uplift will deliver the urgent action needed to tackle the housing crisis and support housing associations and government to achieve their shared aim of building 1.5m homes by the end of this Parliament and delivering a decade of renewal for social and affordable housing.
• Rent convergence will generate more income, enable consistency and fairness in rent setting, retain affordability safeguards, and represent good value for money on government welfare spending.
• Together with other measures in the Spending Review, this policy puts in place the building blocks needed for housing associations to repair the damage to their finances wrought by years of real-terms rent cuts, high inflation and interest rates.
• The combination of the adverse economic environment and rising spending on existing homes (up by 55% since 2020) have caused housing association finances to deteriorate.
• It will take time for the sector to fully recover – but our analysis strongly indicates that the sooner convergence is introduced and the higher the uplift, the faster housing associations can accelerate new development above their current plans whilst meeting the investment needs of their existing homes.
• Some housing associations apply the additional 5/10% flexibility to their rents, often because low local property values mean formula rents are insufficient to cover operating costs. The proposed implementation does not permit landlords to converge beyond formula; if it did, evidence from our members suggests this would support a significant increase in the number of new homes built and so we encourage MHCLG to consider this change.

Headline impacts

• Convergence at any level has a positive effect on housing association investment plans but we find an earlier and higher uplift would support a much higher rate of increase in the supply of new homes by 2029. Nearly twice as many additional homes could be built by 2029 with a £2 versus a £1 uplift.
• Implementing £3 convergence in 2026 would allow housing associations to raise a further £3.35bn over 10 years, supporting the sector to begin to reverse the downwards trend in affordable housebuilding whilst maintaining high levels of investment in existing homes.
• Evidence from 40 medium and large-sized housing associations indicates that introducing convergence in 2026 at £3 per week would deliver 10% more new homes than no convergence over a ten-year settlement.
• Scaled up across the sector we estimate that this could mean at least an additional 51,244 homes at £3 that would not otherwise be built.
• Rent convergence will also bolster housing associations’ ability to invest in their existing homes in the face of uncertainty around the costs of new regulatory standards, benefitting residents. Housing associations are already investing record amounts; £3 convergence could enable spending to rise by a further £2.1bn, supporting the ongoing improvement of homes and services to residents.
• These figures are tempered by ongoing uncertainty around the cost of meeting new regulatory requirements, which we expect to cost housing associations more than has been already set aside in their business plans.
• To mitigate the impact of this on housing associations’ ability to increase supply, we urge MHCLG to provide additional financial support for investment in existing homes alongside the new Decent Homes Standard.

Affordability and fairness

• Housing associations were founded with a historic, social purpose to provide secure homes at rents that are affordable to lower-income households. They are committed to ensuring social rents remain affordable for residents.
• For almost all residents who pay their rent with support from the welfare system, convergence-related rent increases will be entirely covered by benefit payments.
• Formula rent also remains affordable for single-income self-payers on lower quartile incomes in 93% of areas, even if we assume low future wage growth.
• Convergence will also improve fairness and consistency by ensuring residents pay similar amounts for similar tenancies in similar homes.

Read more about housing association rents.

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