Tenants facing rent hike as inflation rises
Housing association tenants are facing a second straight year of rent hikes after the government revealed its highest rate of inflation for two decades.
Residents could see their rent increase by up to 6.1 per cent after the retail price index for September rose to 5.6 per cent from 5.2 per cent in August.
Housing associations are allowed to set rent increases at RPI plus 0.5 per cent. A 6.1 per cent increase could see total turnover for the sector increase by £750 million, based on last year’s figures from the Tenant Services Authority.
According to CORE, a database recording registered social landlord lettings and sales, the average weekly rent for a three-bedroom home in the first quarter of this year was £88. If a 6.1 per cent increase is implemented, this would rise to £93.37.
While housing associations can choose whether or not to increase rents and to what levels, the new figures have left them with a difficult choice as they look to put development plans into place.
‘I was concerned when I saw those figures,’ said Anne Turner, finance director at Orbit. ‘We are moving in to a time when we are looking to increase development and deliver new homes so anything that increases surpluses can help. But it’s a difficult decision to increase rent.’
Housing associations are expected to make decisions over the next two months before any increases take effect in April 2012.
Stuart Ropke, head of investment policy and strategy at the National Housing Federation, agreed that it was not easy for associations to increase rents while tenants’ ability to pay was already under threat from proposed benefit caps.
‘It is quite clear that associations and their boards are going to have to keep an eye on affordability,’ he said. ‘Clearly the welfare reform proposals do have an impact on arrears levels and they [landlords] need to take that into account.’