12 October 2007
Local authorities are urging the government to state exactly how much longer they have to bring their rents in line with those charged by housing associations.
A consultation paper published in August by the Department for Communities and Local Government suggested that rent restructuring should be extended beyond the original date of 2012, but did not indicate by how much.
As consultations closed on October 4, it became clear that any extension will affect some councils more than others, depending on how close they are to achieving their so-called 'guideline' rent.
But according to the Local Government Association, all councils want certainty over a cut-off date. 'Rent restructuring cannot continue indefinitely,' said LGA policy consultant Ruth Lucas. 'We need certainty for local authorities and their tenants.'
Problems started two years ago when ministers put off a review of restructuring until after the 2005 general election.
When the review was held last year, it imposed a 5% cap on rent rises – so delaying convergence between council and housing association rents.
Steve Partridge, a housing finance expert at consultancy Housing Quality Network, said the DCLG recognised that many local authorities would find it impossible to converge by 2012. 'Everybody is going along at their own pace,' he added.
DCLG officials have indicated to the LGA that any extension would be for a maximum of five years. But this would have a knock-on effect on housing associations, which generally charge higher rents and are pushing to exceed the rents formula of retail price index plus 0.5% to fund more house building.
Councils are also angry that the government wants to scrap an allowance that compensated them for keeping down rents. It was intended to fill the gap until money accrued from the housing subsidy was paid, normally one year in arrears.
'Reversion to payment in arrears could have significant cash flow impacts for many authorities,' said Partridge.
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