Target rents in relation to market levels: 2008/09

Target net rents for registered social landlord (RSL) properties are based on a mix of local earnings and individual property values. Although the formula is based on a 30:70 split, in absolute value terms the relative importance of capital values increases with market rents. The differential between property sizes is partially set administratively by a bedroom weighting attached to the earnings part of the formula. The average net rent was originally set in 2000 and has increased each year by the guideline of retail price index (RPI) +1% to 2002 and RPI +0.5% thereafter. For all these reasons it might be expected that over the years there might be increasing differences between target rents and observed market rents. This paper examines this question as well as providing a detailed description of how target and actual rents differ from one another by size and location.