Key points
- The Welfare Reform & Work Bill, which was published on 8
July, includes new powers to require local authorities and other
registered providers to reduce rents by 1% a year for four years
beginning 2016/17, as announced in the Budget.
- Landlords would be required to reduce the actual rent payable
by each tenant by 1% each year, so the requirement applies
regardless of whether an individual tenant's rent is above or below
the target rent for the property, or whether the property is let at
a social or affordable rent.
- The Secretary of State would be able to make regulations
exempting particular tenants, tenancies or accommodation from the
requirement to reduce rents; regulations are likely to be made to
enable tenants with household incomes above £30,000 (£40,000 in
London) to be charged market or near market rents.
- The Secretary of State would be able to issue a direction
exempting a local authority wholly or partially from the
requirement to reduce rents if he considered this would cause
serious financial difficulties.
- The Bill states that the rent reduction requirement would apply
in England and Wales, but DCLG has said that it will not in
practice apply in Wales.
Background
The Welfare Reform and Work Bill was published on 9 July, and is
scheduled to have its second reading in the House of Commons on
Tuesday 20 July. It includes provisions to reduce the benefit cap
and reform tax credit, as announced in the Budget, as well as
measures to require councils and housing associations to cut
rents.
Clause 19 of the Bill requires registered providers of social
housing to secure that the amount of rent payable by each tenant is
reduced by 1% compared with the previous year in 2016/17, 2017/18,
2018/19 and 2019/20. New tenants must be charged the same rent in
each of these years as would have applied had they become tenants
before 8 July 2015.
Clause 20 allows the Secretary of State to make regulations
excepting particular tenants, tenancies or accommodation from the
rent reductions. These regulations may include provisions relating
to tenants whose income, or whose household's income exceeds a
prescribed amount.
Clause 21 allows the Secretary of State to issue a direction
exempting a local authority from the requirement to cut rents or
allowing a lesser reduction if he considers that the authority
would otherwise be "unable to avoid serious financial
difficulties". He may also publish a document setting out how he
thinks a local authority can avoid getting into serious financial
difficulties. "Serious financial difficulties" are not further
defined in the Bill.
Clause 24 provides that the rent reductions should apply to
England and Wales, but not Scotland or Northern Ireland.
The full text of the Bill as published is available here.