Rent and Service Charge Methodologies

Questions to the Mayor of London – answered on 24th May 2022.

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Photo of Sem Moema Sem Moema Labour

Can the Mayor provide a list of the different methodologies used by councils to determine how rents and service charges on council owned property are decided each year by borough?

Photo of Sadiq Khan Sadiq Khan Mayor of London

The Mayor does not have a statutory responsibility for regulating rents.

Councils are landlords to a number of different types of property, including commercial premises and homes of different tenures. Where councils are landlords of affordable homes, they are treated for regulatory purposes as Local Authority Registered Providers, and subject to the Consumer Standards of the Regulator of Social Housing including the Rent Standard. This covers several tenures, each of which are subject to different rent setting formula. More detail on formulae and methodologies is provided in the government’s most recent Direction on the Rent Standard and associated ‘Policy statement on rents for social housing’.

The above guidance also considers treatment of service charges, and there are important considerations in the eligibility of certain elements of service charges for welfare benefits. Service charges are generally subject to the Landlord and Tenant Act 1985. Where the GLA is funding affordable homes, the Capital Funding Guide contains further guidance on service charges and the need to consider affordability for Londoners in setting charges. The Mayor does publish guidance on how landlords should set rent levels for London Affordable Rent and London Living Rent.

All boroughs are effectively subject to the parameters above in rent setting. However, boroughs each have a different legacy in terms of mix of tenure of affordable homes, which will be subject to the restrictions on rents and service charge from different legacy regimes.