Struggling landlords get rent cut loophole
The social housing regulator has set out the steps housing associations must take to avoid the 0.9 per cent reduction in the guideline limit for rents.
Last week the government confirmed the existing formula for setting rents would continue. This uses the September Retail Prices Index figure +0.5 per cent, and states rents should change by no more than £2 a week.
With RPI at -1.4 per cent, this means rents should change by -0.9 per cent +£2 a week.
However the Tenant Services Authority was also given the flexibility to amend this if adhering to the formula would place an association in financial difficulty.
It has now published a note stating it will consider extensions to compliance with the formula where doing so would result in:
- A breach of covenant or other loan default before March 2013
- Existing loan facilities to be exceeded by March 2013
- Significant tenant promises to be broken where these were part of a stock transfer deal
The note states: ‘Extensions will only be granted on the minimum number of properties and for the shortest period required to ensure continuing viability and compliance with covenants.
‘The association should demonstrate and assure the TSA that tenants whose rents would otherwise have reduced will benefit from any reduction as soon as possible, and rent ultimately end up at the same level as if an extension had not been granted.’
Associations have until 31 December to submit requests for extensions to the TSA, which should respond by 15 February.
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Readers' comments (2)
Peter | 18/11/2009 1:22 pm
Is there any reason why costs/rents must go up every year? Most of the explanations seems to pass the buck to someone else? Any ideas?
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Joe Halewood | 18/11/2009 1:48 pm
Any landord shares the same costs as tenants for such matters as electricity, gas, petrol for staff and of course staff salry increases. In addition and like tenants they pay interest on loans etc that in this case will have been set years ago when interest rates were higher. So there is plenty of evidence and obvious explanation as to why landlords costs of supplying their goods and services go up each year.
The only way to increase income to meet these increase expenditure costs is through increased rents.
The levels of increasing income are set by HC formula as explained and are unlikely to cover the increased expenditure of providing the services.
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