Landlords calculate impact of rent cuts

This is because rents are set using the September retail price index, which stood at -1.4 per cent when it was published on Tuesday, plus 0.5 per cent.

Associations have said the cuts will hamper their ability to meet demand for more social homes, and could also damage long-term development projects.

New Charter Housing Group will lose an estimated £2.5 million in rent, compared with its original business plans. Deputy chief executive Martin Frost said: ‘It is hard to ascertain the effect on development, but effectively that is 350 homes gone in the medium term as far as New Charter is concerned.’

In August, the National Housing Federation estimated a 2 per cent rent cut would see associations’ income fall by £260 million. It is currently calculating what a 0.9 per cent drop will mean.

Geraldine Howley, chief executive of 22,000-home Bradford-based landlord Incommunities, said that the reduction effectively meant a drop of £38 million over the course of its 30-year business plan. It represents an approximate reduction of £1.3 million on its original business plan for 2010/11.

The issue for us moving forward is carrying on with tackling issues such as worklessness,’ she said.

The figure is better for landlords than some original estimates, which prompted the government to propose a rent floor of -2 per cent, amid fears that some housing associations’ viability could be under threat. Most associations wanted the government to prevent rents falling at all.

Stuart Ropke, head of investment policy and strategy at the NHF, said: ‘Clearly, this is not as bad as it could have been, at less than 2 per cent.

However, in terms of delivering services to tenants, building new homes and greening stock, it does have a major impact.’

Richard Capie, director of policy at the Chartered Institute of Housing, said the cut would reduce associations’ long-term ability to use their income to fund development. ‘As we are going to see a programme of austerity coming through, there has been a missed opportunity to protect landlords,’ he said.

A spokesperson for the Communities and Local Government department said: ‘We are currently consulting on proposals which will protect housing associations from a drop in rental income of more than 2 per cent, striking a balance between the interests of tenants and the taxpayer, while supporting the need for continued investment in new affordable housing.’

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