A government u-turn on rent increases is good news for local authorities and their tenants but it has left housing associations with an unenviable choice.
Do they hit their working tenants hard in the pocket by imposing rent increases of 5.6% (last September’s RPI plus 0.5%) when they know that inflation is now zero and the guideline rent increase for council tenants is 3.1%?
Or do they protect their tenants only to pile more pressure on their balance sheets knowing that the same RPI formula could force them to cut their rents in 2010/11 (because this September’s RPI could be as low as -4%)?
Looking to their regulator won’t get them off the hook if Friday’s reaction to the CLG announcement from the Tenant Services Authority (TSA) is any guide.
The TSA ‘underlined its commitment to ensuring that in these challenging economic times all social tenants receive an appropriate degree of protection on rent increases, whilst ensuring the financial viability of their landlord’.
But its statement amounted to a repeat of its previous guidance to associations ‘that the rent formula permits a maximum rate of increase’.
The TSA went on: ‘It is for landlords to set their rents within this maximum taking account the impact on tenants and future tenants and landlords’ financial commitments, which include their commitments to invest and raise service delivery for the homes they currently own and their commitments to build much needed new homes.’
Meanwhile it would continue to work with the government on 2010/11 rent levels ‘both in terms of its potential impact on tenants’ bills and the viability of Housing Association’s business plans’.
After the National Housing Federation’s long campaign to preserve associations’ ‘private’ status and independence from government interference it can hardly complain that the decision is being left to individual boards.
But I for one don’t envy them it. If they can spare time from considering their land write downs, how do they balance the interests of their tenants and their balance sheet? What do they do about the problem looming next year? What will they do about their chief executive’s pay? How will they answer tenants’ complaints that they are paying more than council tenants?
Some sort of two-year deal that protects finances and tenants alike seems sensible - and that seems to be what the TSA is hinting at - but will it be possible?
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