Inflation-only rate rises may lead to repair scheme cuts

28 Sep 00
Major repair programmes will be slashed and neighbourhood renewal schemes abandoned if the rent income raised by housing associations is seriously reduced, the government has been warned.

29 September 2000

The 'double-whammy' of inflation-only rent rises from 2002, followed by rent restructuring over the next ten years, will mean registered social landlords cannot provide the same quality of homes and tenant services, RSL leaders claimed at their annual conference last week.

Liverpool-based Riverside Housing Association faces a £42m loss over ten years – purely as a result of rent increases being tied to the retail price index. RSLs can currently raise rents by 1% above inflation.

Deborah Shackleton, Riverside's chief executive, insisted her association was robust and would not allow itself to get into financial difficulties. But that would mean seriously altering its spending plans, including putting less money into community projects, she told a policy session at the National Housing Federation conference in Birmingham.

Twenty-four hours earlier, housing minister Nick Raynsford told RSLs not to keep rents artificially high to fund services that should be provided by councils.

'It's not right to let the local authority off the hook when the government is providing them with opportunities and means to provide these services,' he said.

But Shackleton insisted that Riverside's annual £2m investment in community projects is not 'unnecessary icing'. She added: 'We've a major part to play in delivering government policy so long as government policy doesn't destroy us first.'

The government is studying four different models that would attempt to converge rents charged by councils and RSLs across the country. It should announce the results of consultations by the end of November.

The models are mostly based on regional earnings and capital values. Although rents are generally expected to rise in London and fall elsewhere, not all London RSLs will be better off.

Steve Douglas, chief executive of ASRA Greater London, pointed out that his association would be in deficit by 2011 under the model put forward by the NHF. This proposes that 80% of rent should be based on earnings and 20% on capital values.


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