Target Rents. In the Housing Green Paper, Quality and choice: A decent home for all, the Government identified the problem of inconsistency of rents between similar properties in similar areas owned by social landlords of all types. The incoherence was seen as unfair and confusing for tenants. It was in this context that the Government decided that it was necessary to introduce a new system that could provide a coherent baseline. There were a wide range of objectives: to make it possible to explain to tenants how their rents were set; to bring rents across a growing number of landlords into line; to introduce a market element into rent setting and therefore make it easier to move towards a system that ultimately integrated private and social rents; and to continue to support the fundamental of sub-market rents that provided for those in need (notably larger households with larger numbers of dependants).

The target rent formula. Following consultation the Government opted for a target rent formula based on a 70/30 split between relative county earnings and relative property values, together with a bed size weighting to help maintain differentials between property sizes. From 1 April 2002 most housing associations (HAs) have been required to calculate a target rent for each property and to adjust the actual net rent to meet the target rent in real terms over a ten-year period.

Target Rents: The Reality. Despite the formula’s 70/30 split between relative local earnings and relative property values there is far less variation in the former than the latter:

This means that target rents can be far more influenced by property values than they are by incomes, as this comparison of Berwick upon Tweed with NE Lincolnshire shows: