Rent increase for 2011/12

03/11/2011 10:18 am

The average council rent last year was in effect a two-year increase as it was frozen the year before as central government gave money to thaat effect to loacl government.

The September 2011 inflation figure (CPI) was 5.2% and (RPI) was 5.6% an the formula used in ((RPI+0.5%) plus or minus £2))

Governmen policy holds two diametrically competing forces.  The 'we are all in this together' one and the housing policy of increase rents to pay for more new build at the other scale.  So what the overall increase in social housign will be is anyones guess!

In terms of increase last year the HB payments to council tenants increased from £67.86 to £70.99 - a 4.6% increase and for associations from £77.43 to £79.67 (2.89%) and all social tenants from £73.04 to £75.85 - a 3.84% increase using official HB figures from April 2010 to 2011

So while some council tenants may have had a 6 or 7% rise the average figur is considerably less

03/11/2011 3:28 pm

Potentially, the biggest rent increases will be in the conversions to 'Affordable Rent' from barely affordable social rent to totally unaffordable 80% Market Rent.

If these are included in the rent increase figure it is likely to be even higher than the percentage increase in executive pay, or the percentage increase in utility profits, or the increase in rail fares.

03/11/2011 7:48 pm

I can hear some saying that the first property must be heavily subsidised by £130pw - but the I know some people are really, unintentionally, ignorant.

Perhaps the questioner should draw from Rick's example what rents will be once 'Affordable' rents take over from Social housing.

04/11/2011 8:42 am

In my borough in London they're talking about 8.1% in total

04/11/2011 10:57 am

Sancho - are you trying to deny the Government's drive to conversions.

Each bid for HCA grant has been required how many conversions of existing stock to 'Affordable' rent are involved, and bids without conversions may be less favourably recieved.

The expectation is for the majority of relets to be converted.

There will be no new social housing built, other than in exceptional circumstances and even then with the expectation of early conversion.

Yes, so long as a tenant sits tight, does not exchange, or sign a new tenancy agreement, they are safe, but that does not prevent the final removal of social housing by the bleeding drip of tenure conversion to finish what Right-to-buy began.

So not excitement at all but real design - and as for effects on rents, they will be considerably higher, as will averages as a result, so target rents will have to increase effecting what remaining social tenants are left by then as they will be the ones faced with the further rent hikes.

04/11/2011 11:57 am

If you read the proposals Sancho you will see that the guidance is to maximise rent charges wherever in the country they are. Where existing social rents are higher for instance, affordable rent products will be charged at these levels. Where market rents are higher then affordable rents will be linked to these - it is clearly explained.

If all new rents are therefore aimed as high as possible then the average rent per area will increase. This will have a knock on effect to target rents just via simple mathmetical progression.

Rigging the market to increase rents by all possible means will cause, oddly enough, all rents to rise, so yes, existing tenants do need to take caution from the government's policy. No amount of cotton wool will make the renting future look any better.

04/11/2011 1:26 pm

Sancho  you say above that- "I'm not convinced, by the way, that 'affordable' rents will be substantially higher than target rents in the majority of the country"

If that holds then the affordable rent regime wont create the extra funds to develop new social housing, which is after all its remit.  Hence if it doesnt then no new developments will materialise and the affordable homes programme will have failed to achieve what it set out to do.  Rents will still have risen and so will cost more to the public purse in housing benefit.

The alternate view is that AR rents will be considerably higher than LHA rates (which as a national average ranges between 54 and 69% depending on what figures are used for gross market rent) and this will impact massively in the public purse bill.

Either way and with all the possibilities between these two points rents will increase and so will the public purse bill of housing benefit.  AR therefore cannot be irrelevant as its least possible influence will still place upward pressure on rent and be realised

04/11/2011 3:29 pm

F451, I have read the proposals.  I 'live' the proposals every day. 

Joe, what I'm saying is that in some of the lower value towns in the Midlands and the north, the current target rent is already 80% of the market rent so these rents will not increase.  All the money from AR would theoretically be coming out of London but, as I'm sure you know, all the LAs are fighting against it.  The Government aren't having that becuase, as you say, that would render the entire change to AR pointless.

The Government may or may not win that battle.  If they do, as plenty of people have said, this will push people out of London and into 'the regions'.  I suppose, then, there is an argument that the new demand will push up market rents in those areas and mean that the AR exceeds the target rent. 

So, yes, I suppose in a roundabout way, affordable rent will eventually push up people's rent in areas where it is currently at or below target. 

04/11/2011 3:43 pm

Of course council housing is subsidised.

The tenants do not pay the market rent.

04/11/2011 4:04 pm

Sorry I was a away for a couple of days, hence my late reply, but thanks for all the answers.

I wasn't looking at affordable housing, or assured tenancies, I was looking at the secured tenancies of council housing.

As mentioned, the basic formula is RPI+0.5%+£2, but this is only part of the formula, and depending on average rents it can work out much higher for individual properties.  Having spoken to contacts in three different councils I'm aware of 6.4%, 7.9% and 8.5% in their initial assessment, and someone mentions above another which has assessed theirs at 8.1%.

Last year was not doubled to make up for the previous year, it was also based on a fiarly high RPI, and it happens the previous year had a negative RPI.  The year before that the average increase was looking like going to be 6.2%, with some councils facing higher increases, but the Government stepped in at the last minute (literally 4 weeks to the day prior to the increase) and announced they will compensate LAs only if they bring their nicreases down to 3.1%.  Social landlords missed out on this com,pensations and faced a public flack for having increases which were double what the cuoncils were charging, and the Government ended up paying out millions to compensate councils for their losses.