Warning over push towards short term funds
Whitehall rent cap cut widens tenants' divide and poses business plan problem for transfers. Young stock transfer associations are facing budget shortfalls which could delay improvement works after Whitefall halved its cap on councils' 2009/10 rent increases.
The Department for Communities & Local Government has approved but is not funding a reduction in councils' maximum rent increase from 6.2 per cent to 3.1 per cent after facing criticism over affordability.
The DCLG is now facing further criticism over its decision to revoke a commitment to fund the rent reductions.
The move was only announced after councils had written to tenants to inform them of the change.
Councils' annual increase is calculated on the basis of the rate of the Retail Prices Index (RPI) in September of the preceding year; the high of 5 per cent in September 2008 thus resulted in a large increase for 2009/10 for both RSL and council tenants.
The DCLG’s last-minute move came too late for the Tenant Services Authority to seek to modify RSLs’ rent-capping regime for the new financial year, meaning that RSL tenants face increases of up to 5.5 per cent, some 2.4 percentage points higher than their council and recent transfer counterparts.
Some recent transfer organisations which promised to match council rents are facing budget shortfalls as a result.
Mick Warner, TSA deputy director (North of England & West Midlands), told delegates at the NHF finance conference: ‘A certain amount of angst has been caused by the announcement on local authority rents, especially for transfer associations with an undertaking not to increase rents above local authority rents.’
With deflation widely expected to form the basis for the 2010/11 rent calculation, many RSLs are pushing the Tenant Services Authority to introduce a floor to prevent business plan chaos, as previously predicted by this magazine (SH20.12, p.28).
TSA chief executive Peter Marsh said: ‘I understand entirely why people would like there to be a rents floor and I am pressing the government for certainty so that people can plan with confidence.’
Council rents are noticeably lower than those of housing associations and in recent years a rent re-structuring regime has sought to close the gap.
The current regime is due to end in 2012 and the TSA has promised a consultation in 2011.
‘We will do all we can to resist a settlement that does any harm to the sector in terms of financial viability,’ Mr Warner said.