Housing associations and councils look to have been granted the certainty they have been calling for in terms of a rent deal post 2020.
After George Osborne announced two years ago there would be a rent reduction, many in the sector tore up business plans.
But this new deal will allow housing associations and councils to have greater capacity to build.
A DCLG announcement said: “Under the proposal set out today, increases to social housing rents will be limited to the Consumer Price Index (CPI) plus 1% for five years from 2020. This will give social tenants, councils and housing associations the security and certainty they need.”
The announcement follows Theresa May’s speech to the Conservative Party conference, where she announced £2bn affordable housing funding – some for social rent.
Communities secretary Sajid Javid hinted a rent settlement was imminent in his speech to the National Housing Federation conference earlier this month.
Chartered Institute of Housing chief executive, Terrie Alafat CBE, said: “This new rent settlement is good news for social housing – it provides the stability and certainty landlords need to build more desperately-needed new homes and to invest in their existing homes and services for tenants.
“We need to make sure that rents are genuinely affordable for people on lower incomes. In our recent Building Bridges report we proposed that rents should not take more than a third of net earnings for people on below average income, and should not normally see working households needing to claim housing benefit.”