Rent setting, service charge and affordability policy

Hedyn owns and manages different types of homes where it charges rent. We also charge rent for commercial premises and garages. Some of these homes have service charges in addition to the rent. We also provide services to leaseholders and freeholders who have purchased their home for which they pay a service charge.

The policy complies with the requirements of Welsh Government’s (WG) Rent and Service Charge Standard 2026 to 2036.

Hedyn’s main type of rented property is social rent. This policy provides a methodology of calculating social rents which ensures Hedyn is able to continually maximise its contribution to its communities, whilst ensuring that rents always remain fair, transparent and affordable.

Generating income helps us provide and maintain our homes and commercial premises. It ensures we can provide services to meet the needs of our residents, communities, future generations and commercial tenants

Scope

This policy sets out our approach to assessing the affordability of social rents. Our approach to administering service charges is set out in the associated service charge policy.

Definitions

Roles and responsibilities

Our aim is to make sure that our residents can live well in their homes. We are committed to the following principles:

• Affordable: We will consider the total costs of renting homes and incomes to understand what is affordable for our residents and ensure that residents have the greatest opportunity to sustain their tenancies and thrive.
• Sustainable: We will set rents and service charges that allow us to continue to provide high quality, safe, warm homes for the people who need them in the communities we serve.
• Engage: We will involve residents to develop and review our approach to rent setting and inform our decisions on rents.
• Fair: We will work to ensure that rents and service charges are set fairly and our homes and services represent value for money.
• Accountable: We will be open, transparent and accountable when we make decisions on rents and service charges.

Social rents is how we refer to our main type of rented housing.

Hedyn will adopt the Joseph Rowntree Foundation (JRF) Living Rents Model as the core base method used to assess affordability of rent for social housing customers.

The Model is designed on the principle that rent is unaffordable if residents on low incomes spend more than 28% of their income on rent or spend more than 33% of their income on their rent and associated service charges combined.

This methodology necessitates the use of average income data. Hedyn will use the Office of National Statistics (ONS) Annual Survey of Hours and Earnings (ASHE) to calculate income data using the figures from those in the lowest 25% of earnings. In line with the Joseph Rowntree Foundation’s Living Rent methodology, we consider rents to be affordable when they do not exceed 28% of the net income of lower-income households, based on local earnings data. Similarly, service charges are deemed affordable when total housing costs (rent plus service charges) do not exceed 33% of income.

We will apply the lowest of either the one-year ASHE data, 3-year average ASHE data or the National Living Wage (whichever is the most advantageous for residents.)

ASHE data will be segmented for Newport, Torfaen, Monmouthshire, Blaenau Gwent and Powys so it is relevant to each specific area.

For larger or smaller properties, Hedyn will use a tool developed by the Organisation for Economic Co-operation and Development (OECD) to adjust the income data. This tool takes into consideration typical family compositions that are allocated to particular property sizes and types. The detail of how the tool allocates values to different property types is referenced at appendix one.

The living rents methodology has been checked to ensure that it is fair and affordable for all Hedyn’s residents.

Hedyn will also ensure that social rents remain affordable in comparison with the local market rents.

The rent for all new social rented homes, including internal transfers, will be set at the affordable Living Rent.

Hedyn is committed to aligning all current social rents with the affordable living rent assessment. To do this Hedyn will ensure that the average rent increase for all of its properties falls within the rent envelope that is provided by the WG annually. To align all current social rent with the affordable living rent assessment, adjustments will be required over a number of years that will be applied through the annual rent increase process. Hedyn will not increase rent by more Consumer Price Inflation (CPI) + 1% and a discretionary amount of £2.55 a week as set out in WG Rent and service charge standard 2026 to 2036.

This figure of £2.55 a week may increase subject to inflation and with agreement from WG.

If an existing resident’s rent is lower than the affordable living rent assessment, rent will be increased each year by the agreed percentage uplift, plus a maximum of £2.55 a week on top.

If an existing resident’s rent is higher than the affordable living rent assessment, rent will be either frozen or decreased each year by a maximum of £2.55 a week until the rent has aligned with the affordable living rent assessment. The decision to either freeze or reduce rent will be taken on an annual basis.

Once an existing resident’s rent has aligned with the affordable living rent assessment, rent will be increased each year by the agreed percentage uplift set by WG.

Progress on aligning existing rent will be reported to the board of Hedyn each year through the annual rent increase process.

Non living rent properties

Properties where the living rent will not apply are set out in Appendix 2.

The JRF living rents model stipulates that a resident should spend no more than 33% of their income on their rent and associated service charges combined.

Where rent is within the affordable threshold of 28% of the net income of lower income households, but the combined cost of rent and service charges exceeds 33% of net income, the service charge will be capped or reduced to bring total housing costs within the affordability limit.

Service charges will not be capped where additional discretionary services have been requested.

Whilst Hedyn is committed to minimising all service charges and ensuring they deliver on our value for money principles, some properties will sit outside of the Living Rents Model and they are listed in Appendix 3 with details of why they are not included.

Hedyn aims to ensure that no residents are disadvantaged and are supported to sustain their tenancy and their home.

Residents who are experiencing financial hardship will receive tailored support specific to their individual needs.

Hedyn will endeavour to make rent and service charges fair and affordable for all residents whilst ensuring it secures sufficient income to meet its commitments to residents.

The affordable living rents assessment will be reviewed on an annual basis, to ensure it remains fair and enables Hedyn to deliver services in line with its commitments.

Building this flexibility of approach within this social rent setting policy is necessary to ensure there is no adverse impact upon Hedyn’s long-term financial sustainability.

This policy and the affordability methodology adopted has been developed based upon consultation with residents.

Hedyn will conduct a rolling programme of resident engagement as part of an annual assessment of affordability of rent and value for money considerations.

The findings of this engagement activity will be reported to board through the annual rent increase process and will be published on the association’s website and appropriate social media channels.

Individual residents will be notified of the new rent and service charges for their property and/or garage to be applied for the following year, through the annual rent notification letter. A minimum of two calendar months’ notice will be provided, with any changes taking effect from April each year.

Residents in shared ownership homes and commercial tenants will receive notification of changes to their rent as per the terms of their individual lease.

Engagement statement

Hedyn is committed to ensuring residents take an active role in decision making and shaping services. This policy has been developed with consideration of resident feedback and insight.

Equity, diversity and inclusion and data protection

This policy is subject to an ongoing assessment of impact on service delivery to enable us to continue to evolve to meet the needs of all residents, commercial tenants and colleagues. This policy complies with data protection legislation.

Appendix 1

A Modified Equivalence Scale is a tool used widely by governments across Europe to adjust data for household income, taking into account household size and composition.

The following multipliers will be used to adjust the affordable living rent assessment for each property type

Appendix 2: Non living rent properties

Extra care

These schemes have specific design features, specialist equipment, communal areas, scheme management services and tailored support for residents and therefore may carry higher service charges.

At design stage, rents are set at a level to ensure viability. Subsequently, they will be increased at levels agreed annually by WG. The timing of review and notification will mirror that of social rents.

Supported

Supported housing schemes receive specific tailored support from external agencies that is often provided on site. At design stage, rents are set at a level to ensure viability.

Subsequently, they will be increased at levels agreed annually by WG. The timing of review and notification will mirror that of social rents.

Specialist housing

This accommodation often has specific design features to enable the resident to live successfully in their home. At design stage, rents are set at a level to ensure viability. Subsequently, they will be increased at levels agreed annually by WG. The timing of review and notification will mirror that of social rents.

Affordable rent (sub-market rent)

These properties may or may not have been procured using WG Grant and their aim is to meet housing need for residents above the threshold for Social Housing but without the means to afford the full market rent. The rent including any additional service charges if applicable will be set below local market rent valuations. Rent is reviewed annually or at the end of a fixed term contract when a new contract is issued. New rent is based on the current open market rent value at that time.

Intermediate rents

These properties may or may not have been procured using WG Grant and their aim is to meet housing need for residents above the threshold for Social Housing but without the means to afford the full market rent. The rent will be set at up to 80% of local market rent valuations and is inclusive of any service charges.

Rent is reviewed annually or at the end of a fixed term contract when a new contract is issued. New rent is based on the current open market rent value at that time.

Market rents

Hedyn owns residential accommodation where the rent is set at open market rates and inclusive of any service charges. These rental streams that are not regulated by the Welsh Government and are owned to create a market rated return which can be reinvested in Hedyn’s key social activities. Rent is reviewed annually or at the end of a fixed term contract when a new contract is issued. New rent is based on the current open market rent value at that time.

Traditional shared ownership

Owned homes where the owner has paid for a % share in the property and pays rent on the unowned part. These properties were built in the 1980s, and rent is increased annually in line with the WG uplift. The timing of review and notification will mirror that of social rents.

Shared ownership Wales

Owned homes where the owner has paid for a % share in the property and pays rent on the unowned part. Rent is based on a % of the value of the property at the start of the lease and is reviewed annually or every other year in line with the lease.

Commercial property

A building that is let or available for letting and has planning approval for the sale of goods and services to customers.  Let at market rent or sub-market rent when in support of our social purpose.

Rents will be increased as set out in the terms of individual leases.

Rent to own

Rental properties where the tenant accrues a deposit from rent paid and has the right to purchase the home within 5 years. Rent is set at open market rates. These rental streams are not regulated by the Welsh Government and are owned to create a market rated return which can be reinvested in Hedyn’s key social activities.

Rent is reviewed annually or at the end of a fixed term contract when a new contract is issued. New rent is based on the current market rent value at that time.

Garages

Purpose built garages that are offered for rent or leased to the general public. Rent is reviewed annually, and new rent is based on the average market rent.

Appendix 3: Service Charges – Exceptions to the living rent assessment

These service charges will not be capped but we will strive to ensure they are minimised and provide value for money.