New Rent Policy at the New Era Estate

New Rent Policy at the New Era Estate

Today, Dolphin Living has confirmed that it will be introducing a radical new rent policy, based upon household income for residents of Hackney’s New Era Estate, from 1st April 2016.

This news demonstrates Dolphin Living’s ongoing commitment to providing truly affordable homes for working Londoners. The rent policy launched today offers tenants a choice in how much rent they are likely to pay in the future by giving them the option of either signing up to a new personalised rent scheme, primarily based around household income, or remaining on a standard rent (a fixed annual increase of CPI inflation plus 4.5%).

The policy will use research by the Joseph Rowntree Foundation into living costs to provide a formula upon which to calculate how much rent those tenants who choose to opt in will pay. This will effectively involve a means test on a household’s annual income to calculate how much rent they can afford to pay. It will see a tenant’s rent increase by 50% of their residual income (income over and above that required to pay the current rent and cover the Joseph Rowntree Foundation’s Minimum Income Standard for their household). Thereafter and where we calculate tenants have no residual income, their rent will increase annually by only CPI inflation plus 1% for the remainder of their three year fixed term tenancy.

To avoid large increases for higher earners in any one year, all rent increases will be limited to a maximum of CPI inflation plus 4.5% until such time as the target personalised rent for that household has been reached.

The New Era Rent Setting Policy, a supporting local lettings plan (explaining to whom we will let properties as and when they become vacant and how we will tackle under-occupation & overcrowding) and other associated documents are all available to download here

Jon Gooding, Chief Executive, Dolphin Living comments: “Following extensive research and by working closely with the residents of the New Era Estate, we are pleased to offer a choice for our residents designed to best suit their financial needs. By offering an ‘opt-in’ rental scheme, our calculations show that two thirds of residents, who responded to our initial questions about earnings, will be better off – however, we will also introduce a standard rental option should they prefer.”

The Key Points:

  • From 1st April 2016 a new rental policy for existing assured shorthold tenants (the majority of tenants) on the New Era Estate will come into effect. This will take the form of either a Personalised Rent or a Standard Rent. Prior to the introduction of this, residents will be given a choice as to whether they want to opt-in to the new ‘Personalised Rent’ or remain paying a ‘Standard Rent’.
  • The proposed Personalised Rent will use the Joseph Rowntree Foundation’s research into living costs to provide a formula upon which to calculate how much rent those tenants who choose to opt it will pay. This effectively involves a means test on a household’s annual income to calculate how much rent they can afford to pay. It will see a tenant’s rent increase only by CPI inflation plus 1% if their current income level provides them with more than enough disposable income to cover the Joseph Rowntree Foundation’s Minimum Income Standard for their household. However, as well as income the formula to provide the Personalised Rent will also take into account how many people comprise the household and their age and needs. If following this it is considered that the household can afford to pay more rent then there will be a gradual increase in rent, so as to avoid a difficult to manage large increase (which would also act as a disincentive to join the new model), of CPI inflation plus 4.5% each year until the new target level of rent is achieved. If a tenant can’t afford to pay more, then rents will only increase by CPI inflation plus 1% per year. These tenants who opt-in to the personalised rent model will also receive the security of a 3-year tenancy.
  • The proposed standard rent will be the default rental policy for all those tenants who decide not to opt-in to the new personalised rent model. This will not require the tenant (or joint tenants) to produce any evidence of income, but will result in the application of a rental formula which will increase rent by inflation (as measured by CPI) plus 4.5% or in real terms approximately £8-£12 per week. Tenants who opt to remain on standard rent will be granted a 1-year tenancy.
  • Only personalised rents will be offered on new lets across the estate, with standard rent only being an option to existing residents before that date. In order to ‘balance the books’ a minimum income requirement will be set for each letting based on the financial performance of the estate budget at the time of letting. This ensures the financial viability of the personalised rent model by guaranteeing the economic diversity required in order for wealthier neighbours to indirectly cross subsidise those on lower incomes. We are committed to letting New Era properties at the lowest rents possible whilst also ensuring the financial viability of this policy. Dolphin Living is a not-for profit organisation and reinvests surplus in maintaining and providing new affordable homes for working Londoners.
  • Current new era tenants who are deemed to be overcrowded or significantly under occupying their current home (tenants who have two spare bedrooms) will not be granted a personalised rent. This exclusion supports the local lettings plan which looks to reduce levels of overcrowding and under-occupation. Overcrowded or under occupying tenants will be given priority for any suitably sized vacant units and will then be offered a personalised rent and be able to benefit from a 3 year tenancy.
  • Implementation of the rent policy is proposed through a program of individual meetings with tenants to discuss their rent options.
    • Those that are eligible and wish to apply for a personalised rent will be asked to provide their evidence of income and household composition in order to be assessed.
    • Those who are not eligible will meet with staff to ensure they understand the reasons for their ineligibility and to agree further action to resolve overcrowding, under-occupation or ensure they understand their position as a regulated tenant.
    • Those who are eligible, but have rejected the offer of a personalised rent will be met with to ensure they understand the implications of their decision and have made an informed choice.
    • In all cases, the proposed rent options meeting will also be used to ensure tenancy and household records are accurate and to offer debt and/or benefits advice services
  • The proposed changes will not affect those residents who are on regulated tenancies and Dolphin Living will continue to honour the terms of those tenancies.

For more information on the New Era Rent Setting Policy, please click here