Landlords lambast rent subsidy cuts

Last week, several councils said the changes would cost millions of pounds and could lead to service cuts in some areas. Now more authorities have said they face the same difficulties.

Several more councils said they expected a big increase in the number of their homes eligible for government compensation because their actual rents are below target.

The compensation - called caps and limits payments - is paid a year in arrears. The councils said they would be forced to dip into their housing revenue account reserves - usually used to fund unplanned work - until Whitehall pays the money. They face losing tens of thousands of pounds a year in interest on their housing revenue account.

The problem was caused by low inflation suppressing actual rents while target rents were pushed up when the government brought the rent convergence date forward from 2012/13 to 2023/24.
One council, which did not want to be named, said the amount it expected in caps and limits would increase from £980,000 to £2.045 million between 2009/10 and 2010/11. It would lose £20,000 in interest for every £1 million it took out of the HRA while it awaits payment from the government.

Arm’s-length management organisation Bolton at Home said 14,000 of its 18,000 properties would be eligible for caps and limits payments for 2010/11 compared with ‘hundreds’ in previous years. It would be owed about £600,000 in caps and limits payments for 2010/11. It could use its reserves to cover rent losses but that would cost it around £10,000 to £15,000 in interest on its HRA.

Edward Miller, financial services manager at Bolton at Home, said the ALMO would ask the government to extend the deadline for rent convergence by two years, which would mean lower rent increases and reduce the number of the ALMOs’ homes eligible for compensation to 2,000. He said: ‘It would benefit every council. The impact would be on the government which would end up paying more housing subsidy for councils.’ He said the organisation had approached the Local Government Association and National Federation of ALMOs for backing.

A spokesperson for the Communities and Local Government department said the government made £104 million in caps and limits payments in 2008/09, and £90 million for 2009/10. The department could not predict the 2010/11 figure. She said the rent convergence date had been changed so that the government could fix its national average target rent increase to 3.1 per cent.

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