Rent Convergence
At the end of January 2026, the Government announced how rent convergence will apply. In summary, Registered Providers (RPs) will be able to increase rents by an additional convergence amount of £1 from April 2027 and £2 from April 2028 per week in addition to the CPI+1% increase.
What is rent convergence?
Not all tenants are paying the same rent for similar properties. Rent convergence will allow rents which are below formula rent to increase to this level by an additional factor of £1 in 2027 and £2 in 2028. This can continue for up to 10 years or until the rent charged reaches formula rent
To get a sense of what this means in practice, in 2023 when the annual rent increase was capped at 7%, formula rents increased by Consumer Price Index (CPI)+1% which was 11.1%. This meant new lettings could increase by 11.1%. So actual rents fell behind formula rent, and there were different rents depending on when the properties were let.
This additional income will help give RPs the stability to invest in new and existing homes
Financial modelling
RPs will need to carry out some financial modelling and understand the impact on both your business plan and your tenants. The following factors will need to be considered.
- Convergence can only be used to increase the rents up to formula rent: it cannot provide formula rent plus flexibility. If your RP applies the flexibility, of +5% (+10% supported housing), which is permitted to be added to formula rent, you can only converge to formula rent not formula rent plus flex. You will not be increasing all rents to the same level – the increase to formula rent plus flexibility will still only be made on reletting a property.
- What are the organisation’s priorities for using this additional income? What will be the impact of introducing these plans on your business plan and loan covenant compliance? Will you now be able to bring forward plans for new homes or investing in existing stock?
- What is the potential impact on tenants. For some tenants – especially self-payers – convergence could affect affordability. It may also lead to an increase in rent arrears. Consider whether this is going to cause financial difficulties and whether you need to consider increasing your tenant hardship fund provision.
Prepare for rent increase
Organisations will also need to start thinking about the 2027 increase once the 2026 increase is complete by:
- Revising rent policies and procedures to reflect rent convergence;
- Updating and testing rent increase systems and processes. For example, running a test of the rent increase process to check convergence is correctly included;
- Planning communication for how your organisation is going to consult with tenants on this change
- Ensuring that the relevant staff are trained on the new Rent Standard and Policy Statement.
Enquiries
If you would like to discuss this or any issues raised, please contact Helen Routledge: helen.routledge@campbelltickell.com.
Find out more about our housing finance consultancy services.
This article was originally published in November, and updated on 6 February 2026
