Ministers confirm first ever cut in housing association rents
Government tells associations to drop rents
The government has told housing associations they should cut their rents by 0.9 per cent next year.
It has issued directions to regulator the Tenant Services Authority confirming that rent increases should be set at no more than 0.5 per cent above the Retail Prices Index of inflation.
The formula uses the RPI for September to set rents for the following financial year. RPI was -1.4 per cent in September this year, meaning rents should fall by 0.9 per cent from April 2010.
However housing associations have been left some room for manoeuvre, as the directions state that where homes are let at below target rent, the rise can be RPI plus 0.5 per cent plus £2.
The government had previously suggested imposing a floor on rent cuts of -2 per cent, when RPI was expected to fall more sharply.
The confirmation of the rent cut comes in directions issued by the Communities and Local Government department to the TSA. These include instructions to set standards for the quality of accommodation, and tenant involvement in the management of social housing.
Housing minister John Healey has also confirmed that from April next year the TSA will be given the power to regulate councils that have social housing, as well as housing associations.
He said: ‘I plan to legislate before Christmas to ensure that all tenants – whether they are in local authority or housing association homes – will know the service they can expect from their landlord.’
The umbrella body for housing associations, the National Housing Federation, attacked the decision to instruct associations to cut rents. It said the move would provide short term benefits to a small number of tenants but cause ‘substantial long-term damage to the capacity of the sector’.
Chief executive David Orr said: ‘This is simply the wrong decision. In an environment where the government’s own figures forecast significant cuts in public expenditure over the coming years, a direct cut to the sector’s capacity to build homes and provide services is unwise.’
The NHF has been arguing for a rent freeze. Mr Orr said: ‘Social housing rents have never fallen before, even during two world wars and the great depression.’
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Readers' comments (13)
Melvin Bone | 11/11/2009 9:02 am
'the move would provide short term benefits to a small number of tenants'
I'm sure most tenants will be happy to pay less rent and cope with the consequences later...
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Junior | 11/11/2009 9:04 am
Well my Housing Association made of 5 million pounds profit last year.
I have suggested that David Orr, Chief Executive step down.
What a matter David Orr think you not going to make any money out of them for your survey.
Where do you think these Resident's going to get the money from - most cannot find a job. Alot of Resient's I know struggle to pay the rent now and in alot of cases asking the Housing Association for a transfer due to the fact cannot afford to pay the rent. Do not earn enough money.
You David Orr come and live in Tower Hamlets come and see how many human struggling each week.
I give you one instance my friend died leaving her daughter and son in a Housing Assocation property she on a salary not on minumum wage which means the company only paying her £5.11 well how can a nineteen year old Youth with a brother of 16 yrs old still at college afford this rent without fares, food and bills. She and he not entitled to any form of Housing Benefit.
The amount of times I given then dinner at the weekend due to know have no food money. I have to ensure verbally I said please ensure you pay the rent or your be out - bad enough lost family.
David Orr I suggest you live in the real world with real people.
THe amount of people I hear with excellent work experience cannot get a job and the job centre telling them to go to a work on minumum wage when you know without all the other bills will not be able to afford the Rent.
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Peter | 11/11/2009 9:59 am
Can the Government make such a demand considering there is still a debate whether HAs are public bodies?
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karen | 11/11/2009 10:26 am
Eva,
That situation sounds awful - if possible advise they go to the Benefits office as they will be entitled to other benefits.
One point I'd like to make - there is really no such thing as "profit" in a HA. Any money you make over and above the HAs expenses are poured back into property and development. There are no shareholders who get a bonus. Obviously the board have the option to pay bonuses to staff but thats it.
HA's properties are mortgaged and so profits could feasibly be used to pay some of the capital off but as the interest rates are deliberately very low it doesn't make sound economic sense.
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kass | 11/11/2009 10:41 am
"...Chief executive David Orr said: ‘This is simply the wrong decision. In an environment where the government’s own figures forecast significant cuts in public expenditure over the coming years, a direct cut to the sector’s capacity to build homes and provide services is unwise.’..."
David Orr, Chief Executive of the NHF, has just been made chair of the conservative party panel about home swapping. It is clear that the NHF is a conservative party lapdog and he would oppose this labour party initiative. I might not vote labour at the next elections, but, together with the greatest majority of social tenants, I will CERTAINLY campaign BIG against the conservatiVes... And, if by any chance, housing weill have any weight in the outcome of the coming general election - it's goodbye to David Cameron's pre-celebrated victory.
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Melvin Bone | 11/11/2009 11:13 am
'Can the Government make such a demand considering there is still a debate whether HAs are public bodies?'
Yes. Its the law.
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IAN | 11/11/2009 11:21 am
How quickly the Nat Fed have forgotten the 5.5% increase that occurred in April 2009!
A rent decrease is good news for once, why try to spoil it
(and I work for a RSL!)
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darren | 11/11/2009 11:25 am
I imagine HA's must be benefiting on average from negative inflation elsewhere, eg staff wages falling, costs of materials for repairs falling, lower interest rates and so on. Won't these lower costs offset the loss in revenues from the fall in rent?
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Melvin Bone | 11/11/2009 1:22 pm
'Peter | Wed, 11 Nov 2009 09:59 GMT
Can the Government make such a demand considering there is still a debate whether HAs are public bodies?'
Yes they can!
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Dreamquest | 11/11/2009 3:20 pm
Something that people ought to bear in mind regarding this instruction, that isn't being mentioned. Where a property's rent is less than 105% of the target rent, the RP has the option of increasing the rent by £2 a week (the precise formula being RPI + 0.5% (which gives the guided decrease of 0.9%) PLUS £2.
This would more than likely mean the hotly-tipped and highly-anticipated rent decreases that social housing tenants are being set up to benefit from, simply will not happen.
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