Majority of 50 largest landlords to implement government recommended increase.
Tenants face 8 per cent rent hike
Just four of England’s 50 largest social landlords are planning to protect tenants from significant rent increases next year.
Of the 21 largest stock-owning councils that responded to an Inside Housing survey, just three said they would not impose the maximum increase allowed, based on the retail price index as it stood last September, when it peaked at 5.6 per cent.
As a result, tens of thousands of council tenants will face eye-watering rises of more than 8 per cent. Rents on Newcastle’s 29,000 homes will go up by 8.2 per cent, while residents in Camden’s 23,000 homes will face a hike of 8.1 per cent.
Orbit Group was the only one of 18 housing association respondents that will not raise rents by the full amount. The 36,000-home landlord will limit the maximum increase for tenants to between 6 per cent and 6.5 per cent, citing a higher than usual RPI figure, meaning tenants will pay around £750,000 less than otherwise next financial year.
A further six councils have yet to reach a decision while the remaining 12 indicated that they were likely to use the Communities and Local Government department’s recommended formula.
Local authorities will take control of setting rents from central government this year as part of self-financing reforms, which will also see them take on £29.6 billion of historic housing revenue account debt.
While councils are free to set their own rents under the principles of self-financing, their inherited debt level is also determined by the CLG formula of RPI plus 0.5 per cent plus up to £2 a week, depending on how close council rents are to government-set ‘target’ rent levels. Councils choosing not to apply the formula could face problems servicing the debt.
Despite the impact on tenants, Steve Partridge, director of financial policy at the Chartered Institute of Housing, urged councils to apply the full increase. ‘The main message from us is that now might not be the time to mess around with rents,’ he said, adding that councils may struggle to make up the difference in future years.
Despite this, Doncaster Council, which has 21,000 homes, plans to limit its increase to an average of just 5.6 per cent, resulting in £1.67 million of lost rental income in 2012/13.
A council spokesperson said it could afford to repay its HRA debt of around £58 million ‘due to the reductions which have been achieved in management and maintenance costs’.
Sandwell Council has also chosen not to follow the formula, while a London council, which did not wish to be identified, said it was unlikely to do so.
Tim Willis, a director at housing consultancy Altair, said limiting rent increases was politically driven. ‘Local authorities do have that choice, but it has a long-term impact because they’ll have a lower base next year,’ he added.