Associations will escape 2 per cent rent cuts if RPI predictions come true
Experts ease rent cut fears
Share
Inflation is unlikely to fall so low that housing associations will be forced to make a widely feared 2 per cent rent cut, latest forecasts suggest.
The government has offered housing associations a 2010 ‘rental floor’ of -2 per cent, following Budget predictions that the inflation index they set the year’s rents by would fall to -3 per cent. A floor would mean no association had to cut rents by more than 2 per cent.
The National Housing Federation predicted 2 per cent cuts would slash associations’ income by £260 million a year, and called for the floor to be set at zero.
But economists’ predictions for September’s retail price index this week ranged from -1.4 per cent to -2.3 per cent. September’s rate is important as it is used to set rents the following financial year.
Even the most pessimistic prediction would be too high to trigger the government’s rental floor, as associations are only required to set rents within 0.5 per cent of RPI.
Economists at Oxford Economics thought September’s RPI inflation measure would be -1.5 per cent, Capital Economics predicted -2.3 per cent and the Centre for Economics and Business Research forecast -1.4 per cent. These predictions would translate into worst-case rent cuts of -1.8 per cent, and best-case rent cuts of -0.9 per cent.
Stuart Robkey, head of investment policy and strategy at the NHF, said: ‘While it will help [that deflation may be less than previously predicted we know a fair number of associations where it causes considerable difficulty. We still think the government should have made a decision to set the floor at 0 per cent.’
Have your say
You must sign in to make a comment
Readers' comments (2)
john bull | 18/09/2009 2:04 pm
oh dear housing associations have been increasing their rents ahead of inflation for years.
now if we enter a period of deflation they should reduce thier rents every year it happens, and no floor.
wages and incomes fall in a deflationnaire time so should rents.
bad news; when the japanese bubble burst house prices and rents fell every year since about 13+ years.
time to cut the megga salaries!! deflation plus 2% every year. but start from a base that no one earns more than 100k a year, so they should not be paid it
Unsuitable or offensive? Report this comment
Jim Paton | 21/09/2009 2:51 pm
Another pejorative headline reflecting the perception that RSLs are primarily job clubs for their staff, especially the senior ones.
"EXPERTS DASH RENT CUT HOPES" would have expressed the perspective of a much larger number of people -the tenants.
Unsuitable or offensive? Report this comment