Rent changes will ‘leave councils out of pocket’

18 Jan 10
Councils are facing cash shortages after the government decided to speed up its rent restructuring programme for social housing
By Neil Merrick

15 January 2010

Councils are facing cash shortages after the government decided to speed up its rent restructuring programme for social housing.

The Department for Communities and Local Government said in a consultation paper published in December that it was expecting rents charged by councils and housing associations to converge in 2012/13. It had earlier indicated that this would happen well after 2020. Council rents are generally lower than those charged by housing associations and the government wants both type of landlord to charge the same amounts for similar-sized properties.

To help local authorities reach the convergence target, the DCLG is allowing them to raise rents this April by 3.1% – well above inflation.

But councils claim this will still leave them short of the sums they are assumed to be raising when the government makes its annual housing revenue account subsidy settlement.

Local authorities in this situation are usually compensated one year in arrears through a process known as the ‘caps and limits adjustment’. But even this can no longer be guaranteed as the HRA system faces radical overhaul.

Steve Partridge, director of financial policy at the Chartered Institute of Housing, said the impact would be felt across the board although the sums involved would vary from council to council.

‘It’s a cash flow issue,’ he said. ‘It may be more than that if the government decides not to refund the adjustment.’

Councils cannot raise rents for individual homes by more than £2 per week after the inflation-based figure has been agreed.

The consultation on the housing revenue account subsidy determination for 2010/11 closes on January 25, with the final determination expected on February 8.

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