FAQs on Rent Reduction
1- Which part of the rent has to be reduced?
When we talk about rent, we often mean the whole charge the person pays for living at the property. This is however split up into the core rent and the service charge. The rent reduction applies to the core rent and not the service charge.
2- We are not a Registered Provider, does the rent reduction apply to us?
The rent reduction only applies Housing Associations Registered Providers registered with the Homes and Communities Agency and Local Authorities and to housing managed by their managing agents.
3- Does it apply to all registered provider stock?
It applies to rented social housing only (see: definition) – This means accommodation that has been bought or developed with moneys from the HCA or its predecessors e.g. Housing Corporation or the Department of Environment.
4- We are a charity, does the rent reduction apply to us?
This all depends on the status of the accommodation you have. If you are managing on behalf of a registered provider e.g. a housing association or local authority, yes it will impact on you. If you are managing your own accommodation or private rented accommodation this does not fall under rent reduction.
5- What if we are providing just support?
If you are not involved in providing the housing management service, rent reduction will not impact on you directly. However, you still need to consider the impact of rent reduction on the financial viability of supported housing and the implications of providers having less money for housing management.
6- We are a managing agent, how will the rent reduction affect us?
If you manage on behalf of a landlord, who is not a Registered Provider, for example a private landlord or a charity, the rent reduction does not apply.
If you manage on behalf of a registered provider, 1% rent reduction will apply.You should review your management contract and talk to your partner Registered Provider. The management contract will define who is responsible for setting the core rent. If the contract sets out that the rent setting is the duty of: a) Registered Provider they will advise you, how much the rent will be; or b) Managing agent, then you will have to make sure the rent is reduced by 1% from the figure valid on the 8th July 2015
It is important to note that the core rent does pay for the housing management costs. And so, the reduction in core rent might mean reduction on the fee the Registered Provider gives you to manage the property on their behalf.
7 - What happens if we lease accommodation from a Registered Provider?
This is more complicated, our understanding is if the lease is less than 21 years the registered provider retains the controlling interest and would still be the landlord. This would mean that the core rent will still be subject to the reduction, but we suggest get guidance from the Registered Provider.
8- What does this mean in real terms?
The core rent will be reduced by 1% over the next 4 years. Most landlords expect to put their core rent up every year- based on social landlords’ rent increase formula (Core rent increased by CPI+1%) so the rent reduction will actually be equal to a 12% reduction in the next five years.