REVIEW OF SOCIAL RENT SETTING IN NORTHERN IRELAND Updating the 2007 research project Gillian Young1, Allison Orr2, Kenneth Gibb2 Steve W ilcox 3 and Declan Redmond4 Final Report date: 21 February 2013 1 Newhaven Research Limited 2 University of Glasgow 3 University of York 4 UCD Dublin Contents 1 INTRODUCTION ............................................................................................ 3 1.1 Aims and objectives ................................................................................................3 1.2 Overview of research methods ............................................................................... 3 1.3 Report structure ......................................................................................................4 2 RENT SETTING POLICIES IN CONTEXT ..................................................... 5 2.1 Introduction .............................................................................................................5 2.2 Rent setting in the social sector .............................................................................. 5 2.3 Housing Benefit and Universal Credit ..................................................................... 6 2.4 Rent policies in England ......................................................................................... 9 2.5 Wales ....................................................................................................................15 2.6 Scotland ................................................................................................................16 2.7 Republic of Ireland ................................................................................................18 2.8 Northern Ireland ....................................................................................................23 2.9 Concluding Observations ...................................................................................... 28 3 NORTHERN IRELAND'S SOCIAL HOUSING STOCK ................................ 30 3.1 Introduction ...........................................................................................................30 3.2 Overview of NIHE stock data ................................................................................ 30 3.3 Overview of housing association stock data ......................................................... 32 3.4 Social rented stock attributes ................................................................................ 35 3.5 A benchmark rent ..................................................................................................40 3.6 Concluding observations ....................................................................................... 41 4 ANALYSIS OF BASIC RENT LEVELS AND STRUCTURES ...................... 42 4.1 Introduction ...........................................................................................................42 4.2 National comparisons ...........................................................................................42 4.3 Northern Ireland Rents ..........................................................................................44 4.4 Further consideration of housing association rents .............................................. 54 4.5 Concluding observations ....................................................................................... 58 5 AFFORDABILITY OF SOCIAL RENTS IN NORTHERN IRELAND ............. 61 5.1 Introduction ...........................................................................................................61 5.2 The concept of affordability ................................................................................... 61 5.3 Affordability of social sector rents in Northern Ireland .......................................... 68 5.4 Affordability across the UK .................................................................................... 71 5.5 Welfare Reforms ...................................................................................................72 5.6 Northern Ireland rents under the Universal Credit regime .................................... 75 5.7 Concluding observations ....................................................................................... 77 1 6 POTENTIAL FOR RENT HARMONISATION ............................................... 79 6.1 Introduction ...........................................................................................................79 6.2 Rationale for greater rent harmonisation .............................................................. 79 6.3 Potential rent structure alternatives ...................................................................... 80 6.4 Overview of the illustrative rent harmonisation model .......................................... 81 6.5 Central scenario: main findings ............................................................................. 86 6.6 Concluding observations ....................................................................................... 96 7 SUMMARY AND CONCLUSIONS ............................................................... 98 7.1 Introduction ...........................................................................................................98 7.2 Summary of Findings ............................................................................................98 7.3 Conclusions ........................................................................................................103 8 Appendices ............................................................................................... 109 APPENDIX 1: REFERENCES .................................................................................... 109 APPENDIX 2: PROCESSING NIHE AND HOUSING ASSOCIATION DATA ............. 113 APPENDIX 3: HOUSING ASSOCIATION RENTS - ADDITIONAL TABLES .............. 120 APPENDIX 4: NIHE and HA RENT REGRESSION - SUMMARY OUTPUTS ............ 136 APPENDIX 5: SERVICE CHARGES .......................................................................... 139 2 1 INTRODUCTION 1.1 Aims and objectives This report explores the pattern of rents in the social housing sector and considers the scope for the development and implementation of a harmonised rent-setting regime. The specific objectives of this study, which was commissioned by the Northern Ireland Housing Executive (NIHE), were to: • Compare the rent policy framework, rent-setting arrangements and pattern of rents in Northern Ireland with those in Britain and the Republic of Ireland. • Provide a reasonable like with like comparison of rents between social landlords across Northern Ireland in 2011 and explore the extent to which the pattern of housing association rents reflects the rent policies of social landlords. • Develop a definition of an affordable rent and review the affordability and effectiveness of arrangements to determine rent levels, taking into account the potential affordability implications of the welfare reforms legislated for by the UK Government Review. • Explore the influence of grant rates and rent controls on housing association rents and reserves, their ability to lever in private finance and any potential scope to reduce grant available to housing associations. • Develop a model to exemplify the profile of rents that might be generated from an alternative harmonised rent-setting regime and assess its potential implications, including plausible convergence strategies. The study builds on a previous review of social rents in Northern Ireland (Gibb et al, 2007), which highlighted inconsistencies between the rents of different social landlords and suggested a need to establish a new and consistent way of setting social rents. 1.2 Overview of research methods The main research method was the collation and analysis of data on rents in the social rented sector. All 29 housing associations and NIHE were asked to supply details of the weekly basic rent, service charges (split by HB eligible or not) bedroom size, address and the main attributes, such as dwelling type and size, for each of their properties. Some landlords were able to respond relatively promptly but others required repeated reminders and chasing in order to secure the required data. Considerable time was also required to verify and, where necessary, rectify incorrect or missing data. In total in took 10 months to secure the necessary data. 3 To accompany the data collection exercise, the study team undertook an analysis of the rent policy documents provided by social landlords. The study team also reviewed research and policy documents relating to rent setting in the social rented sector elsewhere in the UK and the Republic of Ireland and conducted interviews with key stakeholders and opinion formers in both countries. 1.3 Report structure Chapter 2 outlines the rent policy framework across the UK and the Republic of Ireland and the wider policy, regulatory and subsidy arrangements that shape social rents. It also reviews the rent policies and structures of social landlords in Northern Ireland and the role affordability plays in setting rents. Documents reviewed as part of this study are detailed in the references section (appendix 1). Chapter 3 provides an overview of the NIHE and housing association data used to inform the analysis presented in the rest of the report and why the basic rent for a 3 bedroom terraced property was selected as a benchmark rent. Appendix 2 provides further details on the research method and the work undertaken to collate and process