Communities and Local Government CommitteeWritten evidence submitted by the Rent Sub-Committee of the Millbank Residents’ Association

1. Executive Summary

1.1 Following a large sale of residential properties owned by The Crown Estates to Peabody, the rent levels have been altered to maximise income. This has caused great difficulty to tenants, most of whom were housed as Key Workers by the Crown Estates. This includes Nurses, Teachers, Police, London Transport workers, Houses of Parliament Administrative Officers etc.

1.2 Two factors have come into play to cause steep rent rises. One is the maximum rent increases of 9% per annum which has now been made standard across the board for Assured tenants meaning that rents which have doubled over eight years will treble in 13 years and quadruple in 16 years if this continues. Registered rent tenants are receiving 9% increases over two years, thus 4.5% pa increases.

1.3 The other factor is that ceiling rents previously set by the Crown Estates based on 60% of market rents in 2003 have been recalculated by Peabody based on a new market rent assessment, thus moving the ceilings to far higher levels.

1.4 Both of these factors have meant that many working tenants and those on pensions are now receiving housing benefit and having little disposable income. Some have moved out of the community, fearing ever-increasing rents for the foreseeable future.

1.5 There are rumours that Peabody may have agreed 7% rent increases for this year, but so far tenants are still receiving 9% increases. Even a 7% rise is remarkably higher than CPI (currently 3.2%) and also much higher than the rent increases enjoyed by both general needs Peabody tenants and those in privately rented properties from individual landlords.

1.6 Whereas many tenants used to regard themselves as Social Housing tenants under The Crown Estates, the term “Intermediate” tenants has now been applied by Peabody to us, making us exempt from the Government Regulations controlling Housing Association annual rent increases. Housing Association General Needs rents are connected to RPI and not Market Rents. In the area of Millbank—a “London Prime” area—market rents have soared since 2003. The prospect is unsettling and grossly unfair.

2. The Facts of the Case

2.1 The Crown Estates sold its residential lettings portfolio to Peabody on 28 Feb 2011 and Peabody re-named the Portfolio its Regency Estate. This followed a strong campaign by tenants during a consultation period to stop the sale going through. After the sale, little by little, tenants found out that because they were “Key Workers” they were not offered the protection that general needs tenants in Peabody and other Housing Associations are given to protect their rents from increasing above RPI plus one or two% per annum. Immediately tenants wrote to Peabody expressing dismay at the 9% increases but they have continued.

2.2 The rents have become unaffordable with the 9% increase year on year, previously put in place by The Crown Estate as a maximum. With this percentage increase, in under a decade with the Crown Estate, rents have more than doubled, and in 16 years would have quadrupled. See the table below:

Annual Rent Increase at 9%

Rent per Month

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

£400

£436

£475

£518

£565

£615

£671

£731

£797

£869

£947

£500

£545

£594

£648

£706

£769

£839

£914

£996

£1,086

£1,184

£600

£654

£713

£777

£847

£923

£1,006

£1,097

£1,196

£1,303

£1,420

£700

£763

£832

£907

£988

£1,077

£1,174

£1,280

£1,395

£1,520

£1,657

£800

£872

£950

£1,036

£1,129

£1,231

£1,342

£1,462

£1,594

£1,738

£1,894

£900

£981

£1,069

£1,166

£1,270

£1,385

£1,509

£1,645

£1,793

£1,955

£2,131

£1,000

£1,090

£1,188

£1,295

£1,412

£1,539

£1,677

£1,828

£1,993

£2,172

£2,367

2.3 Now that the 9% p.a. rent increases have kicked in, young families are finding that they cannot afford the rapidly rising rents and can get mortgages for less. Some older tenants have moved out of their homes of many years rather than be saddled with rents sky-rocketing on this scale—a frightening prospect for those on pensions they may have worked hard to accrue in their working lives. Slowly the community is breaking apart in an unnatural way.

2.4 In less than a year from taking over, Peabody re-assessed all the market rent values on the properties. They set new ceiling rents, which were at 60% of this new market rent. However, many of the properties are in “Prime London” areas where rents have increased rapidly since 2003. It was clear that despite being assured by The Crown Estates that these ceilings would not change, and all tenants were encouraged to find out these ceilings before the sale, this has not been honoured.

2.5 One example is that a two bedroom rent ceiling at the point of sale to Peabody was £700 per month. Peabody re-valued the properties at their current Market Rent. This property’s market rent was declared to be £2,042 per month. 60% of this, £1,225, is the new rent ceiling. This means that instead of a two-bed tenants’ rent increasing by 9% per annum till they reach the ceiling of £700 per month, after which they receive a 1 or 2% annual increase, they will now receive annual 9% increases until they reach £1,225 per month.

2.6 To compound this, there is no limit on how many times Peabody feel they can re-value the properties should market rents continue to increase. So the mathematical effect of this policy is that tenants will never cease receiving the annual 9% increase.

2.7 These new ceiling rents (60% of the Market Rent Valuations) are not affordable for key workers or pensioners and, together with the annual 9% rent increase, cannot be sustained by the tenants, many of whom have their wages frozen in this economic climate.

2.8 Peabody began with a policy of letting all new lets at 80% of Market Rents. However this has had to be curtailed because the voids could not be let at these high rents, so new lets have now dropped to 65% of Market Rents. This is a clear indication to us that Key Workers can simply not afford rents linked to Market rents.

2.9 Not only have tenants been given 9% increases by Peabody regardless of their previous known ceilings, some registered rent tenants have been given 9% rent increases twice in two years instead of once in two years, presumably in error. This is not legally permitted but many tenants do not know this.

2.10 Also other mistakes have happened in Peabody’s favour. A number of tenants received a rent increase notification, but continued to be charged the old rent, despite having been told not to increase their Direct Debits as Peabody would do that for them. However not only did Peabody fail to do this, they even failed to charge the new higher rents, and then informed the tenants months later they must pay up all the suddenly accrued “arrears” on their accounts. Those on Housing Benefit were told by their Council that they could not claim this backdated increase that Peabody has applied, despite being eligible if Peabody had got its Admin correct. However despite complaints, Peabody has insisted that tenants pay up this lump sum or monthly arrears payments from their own pockets, a policy which has naturally caused hardship.

2.11 The other factor which seems unfair is that unlike ex-Church Commissioners’ properties, there are large discrepancies across the board in rents charged by Peabody on its Regency Estate. With the ex-Church Commissioners’ properties, the landlord has agreed the Assured Tenants receive exactly the same rent increase as the Registered Rent tenants. Thus when the Fair Rent is set by the Rent Officer for Registered Rent tenants, to be applied over two years, the Assured Tenants are set half this rent increase but every year, so that it is effectively the same increase as the Registered Rent tenants. Thus in Peabody’s case the Rent Officer’s setting of a rent increase of say 7% over two years, the Assured Tenants would get an increase of 3.5% each year, thus the same as the Registered Rent tenants. This is a fairer playing field and means that some tenants are not “subsidising” others when the overall portfolio income is examined by the landlord.

2.12 No one was given a choice with this sale. Tenants had their hands tied and had to accept the conditions imposed. Many tenants have no realistic individual alternative—they are locked into their homes with no possibility to save or have any disposable income. Yet with The Crown Estates they had always had the security of knowing they were settled, as long as they paid the rent. And their rent ceilings had remained unchanged since introduced in 2003, before market rents leapt up in this area.

2.13 Now this has changed and the fear of losing one’s home is palpable in the community. Anger not seen before is expressed at meetings. This may be the cutting edge of the “Affordable Housing” policy of charging an unaffordable 80% of market rents and expecting people to “move on” after 5 years, but it is having a human cost in our community.

3. Recommendations for the Government

3.1 The tenants would like to be given protection from the massive rent increases we have faced. We agree with Shelter that over 35% of one’s income spent on rent means housing poverty for tenants.

3.2 We have been barred from being General Needs Tenants and the label “Intermediate” has been applied in order that Peabody can get around the rent regulations imposed on Housing Associations by the previous Government. However the homes in our community have always been allocated for Key Workers and this condition is what we were given and we wish it to continue to be honoured. However this goes logically with affordable rents.

3.3 Similarly we were given the promise that the ceiling rents would not change, when we were consulted about the sale, and did not expect this to be ignored in the way it has. We would like the government to look into this and protect us from promises not kept.

3.4 We want the same Government regulations that apply to Housing Associations to apply to us. We want our rent to be connected to CPI not market rents, and if the privately rented sector is given this, then we would certainly feel entitled to it also. If CPI increased however in the same way that Market Rents have increased, then we would expect the landlord to be reasonable in their rent increases so that tenants are not priced out. A home is one’s right and threatening it threatens one’s feeling of security.

3.5 We call upon the government to expect Social Housing organisations to be the Social Housing landlord they started out being, offering truly affordable housing. We suggest that instead of the 9% rent increase policy, an annual rent increase (if any) is linked to a cost of living index, eg the Consumer Price Index (CPI) formula, and be capped at a more reasonable level.

January 2013

Prepared 16th July 2013