By Neil Merrick
Housing associations are to press ahead with above-inflation rent increases, in spite of warnings from their regulator.
Housing associations are to press ahead with above-inflation rent increases, in spite of warnings from their regulator.According to the National Housing Federation, most registered social landlords will raise rents next month by about 5.5%. This is the maximum permitted under a formula designed to bring council house rents up to the level of the much higher RSL rents.
The formula, which bases rent rises on the retail price index of the previous September, was effectively cast aside for 2009/10 after pressure from local authorities. The government promised extra subsidy to enable councils to keep rent rises down to about 3%, rather than the formula’s 6%.
The Tenant Services Authority, which regulates RSLs, argued that associations could, if they wish, set lower increases to reduce the discrepancy with council rents.
But Gavin Smart, assistant director at the NHF, said associations were depending on extra income from rents to preserve services and cover costs they incurred last year when inflation was higher.
Since September, the RPI has fallen to 0.1% and is expected to continue falling. But the consumer price index, which excludes mortgage interest costs, currently stands at 3%.
Some RSLs that had been willing to phase rent increases were belatedly told by the TSA that this was not feasible, added Smart. ‘The main driving factor is to find the best possible balance between affordability and viability,’ he said.
Housing associations are now concerned about what will happen to rents in 2010/11 if, as expected, the RPI reaches a negative figure later this year. RSL leaders were expected to use the NHF’s finance conference, which began on March 18, to lobby TSA chief executive Peter Marsh for a ‘rent floor’ below which rents cannot fall.
A Department for Communities and Local Government spokesman said it accepted that the business models and financial arrangements of RSLs were different to those of councils. This year’s late reduction in the national average guideline rent was ‘an exceptional measure’ due to the global downturn.
‘We will be looking carefully at the position when we consider 2010/11 rent guidelines,’ he said.
The TSA, meanwhile, insists that housing associations are in sound financial health and remain resilient to the downturn. Global accounts for 2008, published at the NHF finance conference on March 18, showed the sector’s turnover exceeded £10bn for the first time last year, while the value of RSL properties rose by 10% to £85.2bn.
