Posted by: Jules Birch16/01/2009
If rent rises of 6 per cent feel outrageous now, what will they feel like when inflation falls to zero or even less and unemployment rises to 3 million?
The economy is slowing down so fast that respected forecasters predict the inflation rate could turn negative by the summer. By April, when an average 6.2 per cent rent rise is due to be imposed in England, it seems certain that the rate will be much lower than the current 3 per cent.
For tenants still in work, the consequences of the recession are likely to be no pay rises, no over-time and reduced hours. That will mean ever-greater reliance on credit cards, doorstep lenders and other extortionate forms of credit to pay the rent. Local authorities could be forced to choose between tolerating big increases in rent arrears or taking possession action.
But many more tenants will be out of work too, meaning a soaring housing benefit bill. And how many will want to take the risk of taking a new job and risking their home as the recession gathers pace?
As things stand, rents have to go up by 6.2 per cent this year and 6.1 per cent next because last September’s inflation rate was 5.1 per cent.
Concern about that high inflation was the reason why the Bank of England kept interest rates too high for too long in spite of mounting concern about a downturn. The bank realised it had got it wrong and changed its mind. The Communities and Local Government department should too.
From Inside edge
Housing commentator Jules Birch puts the latest news in context