Dan’s thoughts on rent capping

There’s no doubt about it; the current hot topic in housing is around rent caps.

In one sense, it’s nice to see rent at the forefront of the conversation. With everything else drawing the attention of Executive Teams, it’s easy to forget service charges and rents make up on average 78% of turnover for housing associations and without it, we wouldn’t be in any position to deliver what we are set up to do.

But while I’m happy rent is getting its time in the spotlight, there’s some feelings of sadness and perhaps also some frustration. Let me give you some numbers:

2019: £289,647,000
2020: £378,745,000
2021: £398,516,000

These are the gaps between service charge income and expenditure from the global accounts of Private Registered Providers with over 1,000 units.

Where was the focus when, year on year, the service charge income vs expenditure continued to show a £300-400m gap? Where was the desire when services were subsidised instead of maximising on your purpose?

If one good thing comes from the rent cap, it will be organisations recognising the opportunity to significantly close this gap, and the benefit it will have on mitigating some of the pressures that an in real terms rent cut would have.

One final thing

In these difficult times for so many of our residents, recovering more service charges may not sound like something you wish to do. There is however, more to understanding your expenditure than increasing income.

When you understand the services you provide, you can tackle expenditure too. You can, in conjunction with your customers, make decisions about the benefit and scope of services. A better understanding will also help drive decisions around value and how to maximise the procurement process. You can manage those contracts and poor performance, instead of using the rental income to issue refunds. Closing the gap isn’t necessarily about increasing income, it should also be about reducing expenditure.

Want to hear more about how you can close the gap and offset some of the financial challenges a rent cap may cause? Email us at hello@ad-esse.com.