07 November 2008
By Neil Merrick
Government plans to bring council rents in line with those of housing associations have run into more trouble after ministers recommended a two-year cap on increases.
Last year, the Department for Communities and Local Government admitted that convergence would not take place until 2016/17 — five years later than planned — as it sought to avoid hefty rises for council tenants.
Now it looks as if the convergence date could be as late as 2024/25 after the DCLG said rent increases ought to be limited to just over 6% for the next two years.
The problem for the government is that the formula used to calculate rents depends upon the rate of inflation the previous September. An extra sum is then added to bring council rents closer to those of housing associations, which are generally higher.
As inflation stood at 5% this September, council rents could have risen by as much as 9% — a figure described by the DCLG as 'unacceptably high'.
It is also keen to avoid upheaval during the review of the housing revenue account system. 'We want to maintain as stable a position as possible over the next two years,' said a letter sent to councils on October 28.
Ken Florey, head of finance at the London Borough of Wandsworth and HRA adviser to the Association of Retained Council Housing, said the government was desperate to get rent restructuring back on course, but that lower rises would please local authorities.
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