By Neil Merrick
23 July 2009
Housing associations are concerned they might be forced to cut services for vulnerable tenants after the government refused to guarantee that rents will not fall next year.
The associations asked the Department for Communities and Local Government four months ago to freeze rents if the retail price index, which helps determine annual rent rises, is still below zero in September.
But housing minister John Healey announced on July 17 that the government was only willing to set a ‘floor’ at –2%. This means that rents will almost certainly go down in 2010/11. This figure ‘strikes a balance between the interests of tenants and the need to support investment in affordable housing’, said Healey.
Annual rent rises, which normally take effect in April, are based on a formula linked to the RPI the previous September. This year, registered social landlords raised rents by an average of 5.5%, even though inflation later fell significantly. Last month, the RPI stood at –1.6%.
Gavin Smart, assistant director at the National Housing Federation, said it was disappointed by the DCLG’s decision and would continue to lobby ministers as well as consulting RSLs on the likely impact.
If rents fell by 2%, there would be a knock-on effect on the services RSLs provided for vulnerable groups. ‘If there is less money coming into the kitty, there will be less money going out,’ he said.
But Peter Marsh, chief executive of the Tenant Services Authority, said tenants should benefit from low inflation. Some landlords had prepared business plans to cope with rent reductions of more than 2%, while others faced ‘tough choices’.
He added: ‘We expect associations to be assessing the impact of falling inflation and developing robust plans to maintain a sound financial position without compromising on service quality.’
In theory, council rents could fall by more than 2%. But as councils pay all of the money they raise back into the housing subsidy system, they are not directly affected in the same way as housing associations.
Meanwhile, the DCLG also announced that it would not charge RSLs a fee for being regulated by the TSA until at least 2011/12.
23 July 2009
Housing associations are concerned they might be forced to cut services for vulnerable tenants after the government refused to guarantee that rents will not fall next year.
The associations asked the Department for Communities and Local Government four months ago to freeze rents if the retail price index, which helps determine annual rent rises, is still below zero in September.
But housing minister John Healey announced on July 17 that the government was only willing to set a ‘floor’ at –2%. This means that rents will almost certainly go down in 2010/11. This figure ‘strikes a balance between the interests of tenants and the need to support investment in affordable housing’, said Healey.
Annual rent rises, which normally take effect in April, are based on a formula linked to the RPI the previous September. This year, registered social landlords raised rents by an average of 5.5%, even though inflation later fell significantly. Last month, the RPI stood at –1.6%.
Gavin Smart, assistant director at the National Housing Federation, said it was disappointed by the DCLG’s decision and would continue to lobby ministers as well as consulting RSLs on the likely impact.
If rents fell by 2%, there would be a knock-on effect on the services RSLs provided for vulnerable groups. ‘If there is less money coming into the kitty, there will be less money going out,’ he said.
But Peter Marsh, chief executive of the Tenant Services Authority, said tenants should benefit from low inflation. Some landlords had prepared business plans to cope with rent reductions of more than 2%, while others faced ‘tough choices’.
He added: ‘We expect associations to be assessing the impact of falling inflation and developing robust plans to maintain a sound financial position without compromising on service quality.’
In theory, council rents could fall by more than 2%. But as councils pay all of the money they raise back into the housing subsidy system, they are not directly affected in the same way as housing associations.
Meanwhile, the DCLG also announced that it would not charge RSLs a fee for being regulated by the TSA until at least 2011/12.
