Affordable Housing Supply Programme (AHSP): process and procedures MHDGN 2023/01

Annex C: RSL social rent benchmark assumptions

Social rent benchmark assumptions have been calculated using the three-person equivalent as the base (100%) and by applying a conversion factor relevant to the property size to that base rent (see conversion factor table below).

The base three-person benchmark assumption is £4,848.  This has been derived by uprating the last published three-person social rent benchmark, which was set at £4,366 in 2020-21, by:

• Annual Consumer Price Index (CPI) inflation in November 2020 and November 2021, with respect to uprating from 2020-21 to 2021-22 and 2022-23, giving a cumulative increase of 5.4%.  This is in line with previous practice to use the November CPI inflation rate to uprate rent benchmarks for the following fiscal year. 
• For uprating from 2022-23 to 2023-24, rent benchmarks have been uprated by 5.34%, in line with the average expected RSL rent increase for 2023-24 as reported by the Scottish Housing Regulator, with the intention of keeping rent increases below inflation in 2023-24.[1]

For example for a four-person property completing in 2023-24 the annual rent is calculated as follows – three person equivalent = £4,848 x 109.0% (four person conversion factor) = £5,285.

Projected social rent benchmark assumptions

The table below shows the relevant social rent benchmark assumptions over the years 2023-24 to 2026-27 inclusive.  The benchmark assumptions for subsequent years have been calculated by increasing the 2023-24 figure by 2% per annum, which is the Bank of England inflation target.

Illustrative example:

An RSL is proposing to build 10 units for social rent which are scheduled for completion in 2024-25. The following rents are due to be charged at the point of first let: 4 no. x 2 bedspace units – £4,552 per unit per annum, 4 no. x 4 bedspace units – £5,250 per unit per annum, and 2 no. x 5 bedspace units – £6,184 per unit per annum

These rental amounts are compared with the table above.  While the proposed rent for the four bedspace unit is lower than the relevant projected rent benchmark assumption of £5,391, the proposed rent levels for the two and five bedspace units exceed the relevant amounts (of £4,416 and £5,712 respectively).  However, as the difference between the proposed rent for the two bedspace units is less than 5% of the projected amount, no justification of affordability is required.  The RSL is however expected to justify why the proposed rent for the five bedspace units is considered affordable given that it exceeds the relevant benchmark amount by 8.3%.