What Do the Current Price Rises Mean For Affordable Housing

What Do the Current Price Rises Mean For Affordable Housing?

So what do price rises mean for affordable housing? April 1st – day one of the energy price increase. With the cost of living on the increase, it’s an incredibly difficult time for many families across the UK. According to findings from the Social Housing Action Campaign (SHAC) survey, almost 60% of their respondents would have to cut back on expenses to allow for any upcoming increases.

What does the future hold for affordable housing? We’ve discussed some of the increases expected, and how organisations and tenants can best prepare for these changes in the future.

What does the price rise mean for my utility bills?

From April 1st, around 22 million customers will be affected by the energy price cap increase. The price cap was introduced to ensure organizations were not making too much profit through offering a fair price. Depending on the type of tariff you are on, ofgem suggest :

  • A default tariff (by direct debit) = increase of £693 per year
  • Prepaid plans = increase of £708 per year

The price cap is reviewed bi-annually, so changes typically come into effect in April and October. Although energy suppliers are inundated with calls of concern, it’s important you source the correct information and understand how your bills are affected.

What is the likelihood of rent increase for my home?

Renting privately

Private rentals can be increased based on current market rates, which are set to give a ‘fair and realistic’ price for properties in the areas. Depending on the tenancy type you have entered, GOV.UK suggests:

  • A Periodic / Rolling Contract – your landlord can’t increase your rent more than once a year without your agreement
  • A Fixed Term Contract – look out for a rent review clause in the tenancy agreement, otherwise they cannot increase rent without your prior agreement for the fixed term

It’s hard to predict whether landlords will increase rents on the properties they own. If they do it’s important to discuss any upcoming changes with your private landlord so you both clearly understand what the future holds.

Social renting

The Regulator of Social Housing sets annual rent increase limits, based on the annual consumer price index (CPI). The CPI is a complicated calculation based on the cost of living, and is reviewed and set every September.

Due to the increase of the cost of living, the total rent increase for 2022-2023 is set at 4.1%. Your social housing provider should be able to inform you on any price increases, and provide advice if you are worried.

What can we learn from the energy price rises?

Firstly, it’s not just energy. It’s also council tax, petrol and water as well as buying food. Everyone is feeling the effect of the cost of living rising. It’s a worrying time, but it allows us to understand what we can afford in case of a change in circumstances or when we decide to move house.

Means testing is a great way to understand realistically what we can afford. It allows us to see if we have enough of a buffer if costs are to rise. This is typically how mortgages are provided. They need to understand your income and expenditures to get a full picture of affordability. That said, no financial adviser would have means tested based on the huge 54% increase in energy prices. None of us have a crystal ball! However, means testing is still useful as you can gauge for some price hikes and understand any buffers you may have.

A good starting point if you’re in work is taking the advice that you should spend no more than 35% of your income on rent. Another way to understand this is to take your rent, and understand what percentage it could rise by before it becomes unaffordable. There are lots of great rent calculators that can help you understand this further, such as RightRent.

Final thoughts on what price rises mean for affordable housing

As an affordable housing platform, we understand the stress and worry the current climate is causing. Our mission is to make affordable housing more accessible. We think it’s important for people to consider all the options available, and always seek professional advice when money worries are becoming too much.

To find out more about affordable housing, visit the MovingSoon Hub.

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