Chancellor Rachel Reeves is to announce raising social housing rents by inflation plus 1% for five to ten years aims to secure predictable, long-term funding for local councils, but it presents both opportunities and challenges. This change, based on a formula that factors in the Consumer Price Index (CPI) plus an additional 1%, is intended to ensure steady revenue for councils to manage and improve subsidized housing. However, by linking rent increases to inflation — currently at 1.7% — tenants would experience rent hikes above the rate of general price growth, impacting affordability, particularly for low-income families reliant on social housing.

One advantage of this long-term settlement is stability for local councils, as they have often advocated for predictable revenue streams to better manage social housing. Councils claim that reliable, higher rents could aid in addressing the shortage of affordable housing, facilitating maintenance and potential development projects. However, this policy would likely place added pressure on government benefits spending, as many tenants rely on housing support to cover rent, potentially offsetting any additional revenue through higher welfare costs.

This policy may also face resistance from tenants, as rent increases outpacing inflation could reduce disposable income, making it harder for social housing residents to manage basic living costs. The proposal, though still subject to consultation, highlights the challenging balance between maintaining affordable rents for tenants and generating enough revenue to support housing development and maintenance.