In a welcome move, the Secretary of State for Communities and Local Government Sajid Javid has announced that the CPI only rent fees will be rescinded from 2020 until 2025. During this period, social and affordable rent will be allowed to rise by CPI +1%. No certainty has been offered beyond 2025 but the reversion to CPI plus 1% for 5 years will have a positive impact.
This move will release much need development funding and potentially will have a bigger impact than the £2bn release of funds for affordable house building announced by the Prime Minister last week. Rent certainty is a key factor for boards in setting development aspirations and ARK expects that the move will make a very real difference to the forward plans of many of our clients.
Our Director Chris Seeley commented that he “expects that some of the more circumspect associations who have predicted CPI only rises over the next 30 years can now re-test their plans to ascertain how much more headroom can be released to drive development programmes”. Chris also said “but this move is not a panacea, all social housing organisations need to keep a focus on efficiency and effectiveness to drive VfM to fund development and strategic asset management”.