Rent and Service Charge Policy

Rent and Service Charge Policy 

How rents and service charges are set and increased

Title: Rent and Service Charge Policy
Owner: Ash McFarland
Approval level: Executive Director and Portfolio Holder

Version: 1.0
Published date: November 2025
Review period: 3 years
Review date: November 2028

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1. Introduction

1.1  This policy explains how the Council set, review and collect rent and service charges. It applies to all our tenants and leaseholders. The Council’s aim is to make sure our rents and charges are:

• Fair and affordable – so people on low incomes can afford our homes.
• Transparent – so you can see clearly what you are paying for.
• Consistent and lawful – in line with the Rent Standard and other legal duties.
• Sustainable – so homes and services are maintained and improved.

1.2  The policy is principally concerned with the initial setting of rent, the annual variation of rents and service charges for properties that fall within the Housing Revenue Account (HRA). As a registered housing provider, the Council must follow rules set by the Government and the Regulator of Social Housing.

1.3  Our aim to set rents and service charges for our residents in a fair and consistent way, regardless of tenure. The Council will do this in accordance with the terms of the tenancy and lease agreements. The Council will provide clear and timely information to residents to support the processes of setting rent and service charges.

2. Relevant legislation

This policy follows:

• The Regulator of Social Housing’s Rent Standard.
• The Landlord and Tenant Act 1985.
• The Housing Act 1985.
• The Rent Act 1977.
• Relevant guidance for local authorities.

3.  Policy details

3.1  What is rent?

Rent is the charge you pay for living in your home. It contributes to the cost of:

• Managing and maintaining your home.
• Repairs and improvements.
• Building new affordable homes.

The type of rent you pay depends on your tenancy agreement. The Council may use:

• Social Rent – set by a government formula based on property size, value, and local earnings.
• Affordable Rent – up to 80% of the local market rent (including service charges).
• Intermediate or Market Rent – usually linked to private rent levels, sometimes for key workers or shared ownership.

You will clearly be told the type of rent that applies to your home.

3.2  What are service charges?

Service charges are separate from rent. They cover the cost of services to communal areas or shared facilities. Examples include:

• Cleaning and lighting in communal areas.
• Grounds maintenance.
• Door entry systems, lifts and fire safety checks.
• Estate staff and management services.

The Council only charge for services you receive. Charges are based on the actual cost of providing the service and do not include any profit for Norwich City Council.

3.3  How rent and services charges are set

• Rents are set each year in line with Government rules, including the Rent Standard.
• The usual formula used is last year’s rent plus an increase of up to the Consumer Price Index (CPI) + 1%. CPI is a measure of inflation published by the Government each month, it is the CPI figure from each September that is used. This is reviewed every year with increase applying from each April.
• Service charges are set based on actual or estimated costs. A breakdown is provided each year so you can see what you are paying for.

3.4  Rent types and how increases are calculated

Worked example

If your rent social rent last year was £100 per week and the Government’s published Consumer Price Index (CPI) for September was 4%:

• 4% of £100 = £4.00
• Plus 1% of £100 = £1.00
• Total increase = £5.00

New rent from April = £105 per week.

Service charges are added separately, based on the cost of providing communal services. For example, if your service charge is £8 per week, your total weekly charge would be £113 (£105 rent + £8 service charge).

3.5  Reviewing and changing charges

• Rents and service charges will be reviewed every year.
• At least 1 months’ written notice of any changes to rent will be given.
• If you are a leaseholder, your rights are covered by your lease and by law (Landlord and Tenant Act 1985) and service charges will be calculated as described in your lease.
• There will be consultation with residents on any new services that could increase charges.

4.  Rent setting

4.1  Formula rent 

4.1  Formula rents are set in accordance with the formula set out in the Government’s Rent Policy Statement and the Rent Standard 2020. The formula rent for each social rent general needs or sheltered housing property will be applied at the point of re-let and the issuing of a new tenancy agreement. Formula rent will also be applied in this way for temporary accommodation unless it is accommodation which is excluded from the Rent Standard. 

4.2  For clarity, the rent will not change in the case of assignments, including mutual exchanges or in the case of successions (unless the successor moves to alternative accommodation). In these cases, the existing rent level will continue to be charged. 

4.3  If the number of bedrooms within a property changes because of an extension or alteration to the property, a new formula rent will be determined based on a revised 1999 valuation of the property. The new rent will be charged to the existing tenant at the time of the next annual rent increase following completion of the works. 

4.4  Rent flexibility 

The Government’s Rent Policy Statement recognises the need for discretion over rent levels to take into account local factors and concerns. As a result, the policy allows the Council to use some flexibility in setting rents up to 5% above formula rent or 10% above formula rent for supported housing. This therefore permits the Council to increase rental income in order to respond to local factors and enable to the provision of a better service to our tenants, for example, to increase investment in services or accommodation, to tackle local issues, respond to the climate emergency or to reduce the carbon footprint of our homes. 

4.5  Rent Flexibility will be utilised for new let properties due to the current economic climate and to meet the costs of the decarbonisation of Norwich City homes. 

4.6  Rent cap

The Government’s Rent Policy Statement sets out limits to formula rent charges which is known as a Rent Cap. Where the formula rent would be higher than the rent cap for a particular size of property, the rent cap will be used instead. 

4.7  Affordable rent

Affordable rents are typically higher than social rents. The intention behind this rent model is to generate additional capacity for investment in new affordable housing. The rent for affordable rent housing (inclusive of service charges) must not exceed 80% of gross market rent. ‘Gross market rent’ means the rent (inclusive of any applicable service charges) for which the accommodation might reasonably be expected to be let in the private rented sector. Valuations of market rents will be established for each new property, or at re-let, using a RICS recognised methodology. Affordable rents will be set at 80% of this market rent or capped at the relevant Local Housing Allowance (LHA) rate if the LHA rate is lower. 

An affordable rent should be no lower than the potential formula rent for the property. In cases where the rent would be lower than the formula rent, the formula rent constitutes a floor for the rent to be charged. 

4.8  Temporary accommodation

Rents will be set at formula rent, as described in 4.1, in accordance with the Rent Standard 2020 where it applies. 

4.9  Temporary accommodation excluded from the Rent Standard

If units of temporary accommodation meet the criteria to be excluded from the Rent Standard a higher rent may be charged as required to sustain the accommodation provision. The rent charge may be set at Local Housing Allowance (LHA) at the point of re-let and increased annually in line with LHA rates each April. The Council will ensure that the rents in these settings remain below market rate levels in order for them to meet the definition of low-cost housing/social housing as outlined in section 69 of the Housing and Regeneration Act 2008. At the point of increasing the rent, a valuation will be obtained using a RICS recognised methodology and the rent capped if necessary.

4.10  Ground rent

Ground Rent is not covered by the Rent Standard 2020. Where Ground Rent is applicable this is stated within the lease, the majority being fixed to the annual sum of £10. Due to Ground Rent being a fixed amount, it is not subject to an annual review.

5.  Service charge setting

5.1  A service charge is a charge payable by tenants or leaseholders to pay for services such as the provision of communal area services. Tenants do not pay for repairs and maintenance in their rented home as these are met by the landlord and included in the rents. Leaseholders do pay their share of these costs.

5.2.  Examples of the types of service charges that may be included for residents where the service is received, although this list is not exhaustive:

• window cleaning
• door entry maintenance
• lift maintenance
• grounds maintenance
• management costs
• housing management services
• caretaking
• communal power and water supply
• communal heating systems
• communal cleaning including

5.3  The determination of service charges for leaseholders will be in accordance with the provisions in their lease. The method set out in the lease will be used to divide the costs to residents of a shared building charges or estate charges.

5.4  For tenanted properties, fixed service charges will be set. The charges set are an estimate of the costs of providing services and are reviewed annually. The charges are based on how much it has cost to provide services in the previous year and take into account inflation and any upcoming one-off charges. There may also be charges set for usage of capital assets (for example door entry systems) that allows us to maintain and replace items for the duration of their lifecycle and for routine inspections and testing due in the year ahead.

5.5  Charges will be for services provided at the property or to the communal areas in the locality of it, from which the tenant, license holder or leaseholder benefits. 

5.6  Where new properties are built or acquired, to which chargeable services are provided, or properties are remodelled, resulting in a significant change in services, then service charges will be based on an estimate of actual cost until the end of the first full year of provision. Charges for subsequent years will be based on the actual cost.

5.7  New or extended service charges will be introduced where there is a requirement to further maintain communal facilities or provide new services. The Council will consult with tenants and leaseholders regarding such changes. Charges for these services will initially be set on an estimate of the actual cost. There may be an additional charge for the administration of service charges. 

5.8  Heating charges 

Norwich City Council operates several communal and district heating systems using various fuels. To protect residents from fluctuating fuel prices, the Council averages heating costs across all systems, ensuring everyone pays stable, predictable charges regardless of their building's fuel source.

The calculation of communal heating charges, where applicable, is based on average usage data from previous years, with any expected increases.  This method helps to balance out any fluctuations in demand caused by unusually mild or cold winters. The underlying principle is that heating charges are set to recover the full cost incurred by the Council in delivering this service to residents. The Council sets a set a fixed weekly charge for each property based on its size.

6. Support and Advice

6.1     Rent and service charges may be a large part of your household budget. If you are worried about paying:

• Contact our income team as soon as possible. Help if you're struggling to pay | Norwich City Council
• You can get advice on benefits, budgeting and debt support.
• You may be able to agree repayment plans if you fall behind.

7.  Equality and fairness

Norwich City Council is committed to ensuring that rent and service charge policies are applied fairly and equitably to all residents. 

To ensure good access to services the Council will:

• Provide rent and service charge information in accessible formats utilising our website to enable translation services and screen readers. Offer paper versions in various formats when requested.
• Offer interpreter services and advocacy support where needed.
• Monitor the impact of rent and service charge decisions to ensure they do not disproportionately affect any group.
• Take action to address any identified inequalities.
• Ensure staff involved in rent setting and service charge decisions receive equality and unconscious bias training.

This policy supports our legal obligations under the Equality Act 2010 and reflects our commitment to inclusive and transparent housing services.

8.  Transparency and Accountability

8.1  This will include:

• Publish this policy on our website.
• Provide a clear breakdown of your rent and service charges every year.
• Consult with residents when introducing new services.
• Regularly review costs to make sure they are reasonable

9.  Review

9.1  This policy will be reviewed every three years or sooner if required by changes in legislation or regulatory guidance. The review will consider any feedback received, including from residents and Council staff, to ensure that the policy remains fair, effective and fit for purpose.