This page explains how the Government wants councils set their rents.

Rents 

The Government would like there to be a sensible pattern of council and housing association rents across the whole country. So it asks  all social landlords in England to set their rents in the same way, based on a single formula. The process of moving to this single system is called ‘rent restructuring’ and the rents are called ‘formula rents’.

The Government wants the rents charged by social landlords to be fair and affordable. It believes that their rents should:

• remain affordable in the future; generally be well below those charged by private landlords;
• be linked to the size, location and condition of the home; and
• be similar to rents for other council and housing association properties of a similar size, location, and condition.

After consulting councils, housing associations, tenants’ groups and other interested groups, the Government produced a formula for setting rents. This formula results in rents that are based on the value of the property, the number of bedrooms in the property, and local earnings.

Because the changes are being made over a period of at least 14 years, any rent change (up or down) should be gradual. To make sure tenants don’t face large increases, the Government has said that in any one year, a tenant’s weekly rent cannot go up by more than the rate of inflation plus 0.5%, plus £2 per week.
For example, if your rent is £60 a week, and inflation is 2%, then the most your rent should go up by is £60/100 x 2.5 (inflation + 0.5) + £2 = £3.50 a week.

Because the Government is concerned about protecting tenants from large rent increases, this limit always applies, even if it means your rent cannot reach the formula rent by 2016.

If your rent is above the level it needs to be, it won’t drop to the new level immediately. Your rent will either fall slowly, or go up by less than the rate of inflation, so that your landlord can keep providing a good level of service.

Service charges

The Government’s formula only applies to the rent you pay for your home. Your council can also charge a separate service charge for services such as cleaning shared areas or gardening. However, the council should not make a profit out of these charges.

The Government thinks that tenants should know what services they are supposed to receive and at what cost. For this reason, the Government is encouraging councils to give you a breakdown of charges so you can see how much you pay for rent, how much you pay for services, and what you get for your money.

If you receive a service now (such as caretaking) which you pay for as part of your general rent, the Government expects your landlord to give you a breakdown of charges in future. Your landlord has to decide how to do this, but the Government has said that this should not mean sudden big rises in charges for tenants. If your council charges you a single amount to cover your rent and a separate service charge, then the total should not go up by more than the rate of inflation plus 0.5%, plus £2.

For example, if your total rent is £60 a week, and you receive a caretaking service costing £10 a week, then your landlord could separate the charges into a rent of £50 plus a service charge of £10. If inflation is 2%, then the council could put the total up by £60/100 x 2.5 (inflation + 0.5) + £2 = £3.50 a week.

The Government is encouraging councils to keep service charge rises within similar limits in future years.

There are some services which, even though they are not provided to your particular home, are essential for you to be able to live there. For example, if you live on a high floor in a tower block, you cannot get to and from your home without a lift. The Government has said that any essential services for council tenants, such as lift maintenance in tower blocks, should be paid for from the formula rent without you having to pay any extra charge.

Ministers will review the progress social landlords have made towards formula rents regularly. These reviews will consider the effect the system has had on landlords and tenants, and whether any improvements need to be made.

How can I find out more?

For further information, please visit the Communities and Local Government website.