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Councils in Wales will lose a total of £2.7m from their Housing Revenue Accounts (HRAs) next year, following the Welsh government’s decision to issue a lower rent settlement.
More than half of the reduction in income will be felt by Cardiff and Swansea councils – the largest council landlords in Wales, with around 13,500 homes each.
For the past five years, social landlords have been subject to a rent cap of the Consumer Price Index (CPI) plus 1.5%.
However, the Welsh government announced in December that they will be allowed to raise rents by only the CPI – currently 2.4% – in the next financial year.
Landlords had also been given flexibility of another £2 a week, but this will be removed for those with average weekly rents within or above their ‘target rent band’, which the Welsh government determines.
Housing associations called the change “disappointing”, but the Welsh government said it was a “measured approach” that reflects “the demands that higher rents can place on tenants”.
The settlement will be an interim arrangement, expected to last for a year, while ministers await recommendations from an ongoing review of affordable housing policy in Wales due to report in April.
Cardiff Council told Inside Housing that the CPI-only increase was lower than it expected and would cut £727,000 from its HRA budget for 2019/20. This will be offset “through operational savings and efficiencies, including limiting management and maintenance growth”.
It added: “If this level of increase is continued into future years, this will seriously impact on the council’s plans to build new homes. It will also impact on the council’s ability to maintain existing housing and improve neighbourhoods.”
Swansea Council said the new rent settlement – as well as changes in its expectations of the impact of Universal Credit – would reduce its income for 2019/20 by £768,000.
It said it was difficult to calculate how much would be required in savings as a result of the rent change.
Wrexham Council said that the settlement will reduce its rental income by £648,000 over the year.
Neal Cockerton, chief officer for housing and assets at Flintshire County Council, said the CPI-only increase represented a £374,000 loss to its HRA business plan, but said the impact had been softened as it could still apply the £2-a-week flexibility.
Anglesey County Council said it would need to find £181,792 in savings because of the rent settlement.
However, some councils said they would not be affected.
Carmarthenshire Council said it had anticipated a CPI-only increase, so will only lose £80,000 in rental income as a result of slightly lower inflation levels.
Pembrokeshire, Powys and Caerphilly councils said their stocks are largely below their target rent bands so the ability to apply the £2 increase means they will not lose income.
Denbighshire and Vale of Glamorgan councils did not respond by the time this article was published.
However, papers before the former’s cabinet last month indicated that it could not apply the extra £2 to most of their stock, while Vale of Glamorgan’s cabinet has agreed to apply £1.22 of the £2.