By Neil Merrick
16 October 2009
Housing association rents are set to fall next year, but not by as much as landlords initially feared.
September’s inflation figure, as measured through the retail price index, was –1.4%. This figure, published on October 13, is part of a formula used to set rents each April by councils and registered social landlords.
Earlier this year, the government angered RSLs by suggesting that rents could fall in 2010/11 by as much as 2%. Landlords hoped to avoid any reduction by freezing rents if the RPI remained negative.
The National Housing Federation warned this week that the income of associations could fall by up to £130m when they are being asked to provide extra homes and other services, including apprenticeships.
‘There are increasing calls on housing association resources from government,’ said Stuart Ropke, its head of investment policy and strategy.
The federation also raised the spectre of a legal challenge if RSLs were forced to cut rents. It claimed the formula, introduced seven years ago, was designed solely to bring RSL rents into line with those of councils. ‘We don’t think there is a mechanism for rents to be reduced through the formula,’ said Ropke.
Under this system, social landlords fix rents according to the previous September’s RPI but can vary the sum by plus or minus 0.5%. It therefore seems likely that most RSL tenants will have their rents cut by 0.9%.
Council rents should also fall next year – assuming that local authorities adopt the formula again. In March, ministers bowed to local authority pressure and agreed that council rents should rise by only 3% in 2009/10, not the required 5.5%.
Speaking at last month’s NHF conference, housing minister John Healey said he had not been persuaded by the federation’s case for freezing rents. He pointed out that this year they rose by more than 5% even though inflation fell significantly between September and April.
Some associations have also weakened their case by awarding senior executives inflation-busting salary increases. But RSLs are being supported by the Council of Mortgage Lenders, which – in its recent response to consultations over new regulatory standards – argued that a rent cut would threaten RSLs’ viability and capacity.
The consumer price index, the government’s preferred measure for inflation, which excludes mortgage costs, fell in September from 1.6% to 1.1%.
16 October 2009
Housing association rents are set to fall next year, but not by as much as landlords initially feared.
September’s inflation figure, as measured through the retail price index, was –1.4%. This figure, published on October 13, is part of a formula used to set rents each April by councils and registered social landlords.
Earlier this year, the government angered RSLs by suggesting that rents could fall in 2010/11 by as much as 2%. Landlords hoped to avoid any reduction by freezing rents if the RPI remained negative.
The National Housing Federation warned this week that the income of associations could fall by up to £130m when they are being asked to provide extra homes and other services, including apprenticeships.
‘There are increasing calls on housing association resources from government,’ said Stuart Ropke, its head of investment policy and strategy.
The federation also raised the spectre of a legal challenge if RSLs were forced to cut rents. It claimed the formula, introduced seven years ago, was designed solely to bring RSL rents into line with those of councils. ‘We don’t think there is a mechanism for rents to be reduced through the formula,’ said Ropke.
Under this system, social landlords fix rents according to the previous September’s RPI but can vary the sum by plus or minus 0.5%. It therefore seems likely that most RSL tenants will have their rents cut by 0.9%.
Council rents should also fall next year – assuming that local authorities adopt the formula again. In March, ministers bowed to local authority pressure and agreed that council rents should rise by only 3% in 2009/10, not the required 5.5%.
Speaking at last month’s NHF conference, housing minister John Healey said he had not been persuaded by the federation’s case for freezing rents. He pointed out that this year they rose by more than 5% even though inflation fell significantly between September and April.
Some associations have also weakened their case by awarding senior executives inflation-busting salary increases. But RSLs are being supported by the Council of Mortgage Lenders, which – in its recent response to consultations over new regulatory standards – argued that a rent cut would threaten RSLs’ viability and capacity.
The consumer price index, the government’s preferred measure for inflation, which excludes mortgage costs, fell in September from 1.6% to 1.1%.
