Housing Minister Grant Shapps has announced further details about the new scheme that will allow housing associations to offer flexible tenancies and deliver more affordable homes.

From 2011, housing associations will have an additional Affordable Rent option to offer households who need support. Affordable Rent properties will give housing associations the flexibility to offer fixed term tenancies to some new tenants at a rent level higher than social rent - with landlords able to set rents at up to 80 per cent of local market rents.

Landlords will be able to offer the new tenancies in return for investment agreements, which will enable them to raise funds to build more affordable housing. The flexible tenancies will be for new tenants only - the lifetime tenancies and succession rights of existing council and housing association tenants will not be affected.

The Affordable Rent model is the first step towards delivering these wider reforms announced last month and to be included as part of the forthcoming Localism Bill.

The Government is investing £4.5 billion to deliver up to 150,000 new affordable homes over the next four years, with around £2bn of this funding to support the delivery of new Affordable Rent homes. Ministers intend to make the payment of grant funding conditional on transparency.

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Ministers believe the current centrally-determined system for social housing has led to the number of people on waiting lists over the past 13 years to almost double to five million. Affordable Rent is part of a package of measures that will affect all areas of social housing policy, giving councils and housing associations more flexibility to use their social housing stock to the maximum effect and drive down waiting lists.

In a statement published in Parliament, Mr Shapps set out how the Affordable Rent scheme will work. Early next year, the Homes and Communities Agency will publish a full framework document that will form the basis for bids from housing associations who are interested in offering Affordable Rent.

Housing associations will have the flexibility to convert vacant social rent properties to the new flexible tenancies at a rent level of up to 80 per cent of market rent - but only after they have reached an investment agreement with the Homes and Communities Agency about how additional rental income will be reinvested in delivering new affordable housing.

Mr Shapps said: "With five million people languishing on waiting lists, it's clear we need to act quickly to completely overhaul the system for social housing. That's why today I am setting out the next steps towards a smarter system - one that ensures housing associations have the flexibility they need to target help at the people who really need it, for as long as they need it.

"While we will not change the arrangements for existing tenants, it's senseless to pretend, especially in times of economic hardship, that everyone accessing social housing is in the same boat, and needs a lifetime tenancy. Being able to offer a fixed-term Affordable Rent option will mean housing associations become even more effective in helping people get back on their feet, and ensure more affordable homes are built for every pound of taxpayers' money that is spent."

(CD/KMcA)