13 March 2009
By Neil Merrick
Ministers have bowed to pressure from local authorities and agreed to halve rent increases for council tenants in England.
In a surprise announcement on March 6, the Department for Communities and Local Government said it was ploughing more money into council budgets so that rent rises for 2009/10 would be in the region of 3%, or £2 per week.
English councils had reacted angrily when the government’s rent formula, based on inflation last September, led to projected increases of up to 6%. With the retail price index at 3% and expected to fall, they claimed tenants were being unfairly penalised.
Housing minister Margaret Beckett, who had earlier ruled out assisting councils, said the government wanted to help tenants cope with ‘challenging economic times’. She added: ‘It is for each council to take up this offer of support, but I would expect them to ensure their tenants receive the full benefits.’
Ken Florey, adviser to the Association of Retained Council Housing, said it appeared that the Treasury was using lower rent rises to stimulate spending. But councils, most of which set new rents weeks ago, would have to study the changes closely.
‘The government needs to provide absolute certainty that this mechanism allows the compensating subsidy to come through and pay for it,’ said Florey, head of service finance at the London Borough of Wandsworth.
The London Borough of Lambeth, which is due to raise rents by 16%, said details of the extra subsidy had not yet been made clear by the DCLG. But Defend Council Housing welcomed the announcement as ‘a small step in the right direction’.
Margaret Eaton, chair of the Local Government Association, said the episode illustrated ‘the glaring need to reform the way council housing is funded’. With housing association rents expected to rise by about 5.5%, government plans to reach convergence between registered social landlord and council rents through long-term restructuring have been set back further. Last year, the DCLG estimated the convergence date could already be as late as 2024/25, 13 years later than initially hoped.
Gavin Smart, assistant director at the National Housing Federation, said associations operated in a different business environment to councils. The NHF wants the Tenant Services Authority to introduce a ‘rent floor’, so that rents would not go down in 2010/11 if the retail price index were negative.
But Richard Moriarty, director of market development at the TSA, urged associations to see the increase permitted under the formula this year as a maximum and take into account the impact on tenants, as well as their financial commitments.
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