The housing industry has been presented with a mixed bag in the chancellor’s spending review, with the level of social rents being set but questions asked over a proposed £3bn investment.
The amounts registered providers will be allowed to charge in social rent was fixed to an annual increase of the CPI rate of inflation plus 1 per cent for the next 10 years.
Housing associations had been hoping the measure would continue to be linked to the RPI measure, which is generally higher.
At present they can increase rents by RPI plus 0.5 per cent, and the change will impact the viability of new-build schemes.
The new rent formula will run from 2015/16 to 2024/25.
The industry is also waiting with baited breath on the future of funding for social housing, with funding from the £4.5bn Affordable Homes Programme due to drop off after March 2015.
Plans for affordable homes funding will be set out tomorrow in the Investing in Britain’s Future announcement, when the bulk of capital spending plans will be unveiled.
However, chancellor George Osborne said that “very positive announcements about affordable housing going forward” would be made tomorrow.
A level of £3bn in funding for affordable homes was mooted, but it is unclear what timescale this will apply over and where it will be targeted.
A total of 84,000 new affordable homes have been built so far in this parliament, with a target of 170,000 by 2014/15.
National Housing Federation chief executive David Orr said the announcements were “broadly positive” but called for more detail.
He also hailed the news on rent levels as a “positive step” that would help housing associations formulate their construction plans to tackle a “desperate housing crisis”.
On the £3bn figure, he said it was “unclear” how the funding would affect registered providers’ abilities to build new homes.
Thames Valley Housing Association group development director Mark Allnutt said the rent change “could have been a lot worse”, but would largely depend on future CPI levels.
However, he added that the registered providers who had worked through long-term financial projections could “withstand the change and can cope with any downsides if CPI falls further behind”.