The following article is a useful look at the two pips that squeak in the social housing game when a nation’s rate of inflation climbs into the stratosphere. That circumstance is currently a happening event in many, if not most, nations where social housing exists. The world is undergoing a number of financial upheavals, no thanks to COVID and the war in the Ukraine.
In the social/public/state/council world of government-subsidized housing, there are two major financial forces which may be in competition.
First, there is generally an international consensus (these days more often honoured in the breech than the execution) that low and no income renters in social housing should have their rents capped at 30% of the household’s income. Any more than this and a tenant’s life in general will be stressed by the inability to pay for other all-important associated costs of living, as well as potentially placing individual or family on a road towards eviction.
The second problem must be faced when changes to social rent are made to prevent crippling tenants, but may as a consequence be crippling to their landlords. In the case of social housing, these landlords may be local government itself, or some non-profit entity such as housing associations or housing authorities.
It can be possible that social rents are paid into general government revenue. In turn, a social rent landlord’s expenses might not be linked to tenant rents, but based on other accounting principles and paid from a government treasury. In this case, there may be no crisis for social rent landlords caused when rents are increased or capped. (There may certainly be landlord crises aplenty, but they are not directly linked to rents.)
But when the collected rents are a social landlord’s sole source of revenue, a decision to cap rents may indeed provoke a crisis for landlords. In the UK currently, government(s) responsible for social housing are layering a growing financial burden upon social rent landlords to manage and maintain buildings, and to upgrade/replace land, buildings and tenants. That landlord responsibility, especially with growing costs due to inflation, may require greater income than the amount that comes from rents, which are capped to lessen tenant burdens.
Are tenant rents and landlord income required to co-exist in a framework where no other financing streams can be tapped? If so, there is a dilemma between protecting a tenant’s right, as well as ability, to live in social rent housing, and at the same time fulfill a social landlord’s responsibility to manage, keep tenants safe, repair, and upgrade social housing properties.
Read more in LABOURLIST: A social rent freeze not entirely funded by the Treasury could be self-defeating
