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Government announces Council rent increases to be halved
Housing Minister Margaret Beckett announced on 6 March that the guideline council rents increase for 2009/10, originally set in September 2008 at 6.2%, is to be halved to only 3.1%. The Government is to make funding available to support local authorities to make the change. The Minister had already indicated that she will look again at the guideline rents for 2010-11.
The 6.2% increase had been set when inflation was running at some 5% and at that time the Government also proposed an upper limit on actual rent rises above 7%. CIPFA’s Local Authority Housing Panel has urged CLG to reduce these increase figures and in a response last year to the Government consultation, CIPFA pointed out that “An upper limit of 7% on average rent increases seems rather high in the current financial climate, is likely to hit those tenants who receive no benefits support for their rent particularly hard and should surely be seen in the context of average rises in wages and pensions if they are not to result in disincentives to work. This is likely to be especially the case where (as in September 2008) the inflation rate is high but may fall significantly later (as many predict for 2009).”
Inflation rates did indeed fall and the Government’s announcement is welcome though its timing is likely cause difficulties for many authorities which have already set their HRA rents and budgets. It will also cause especial difficulties for any authority in the midst of a Large-scale Voluntary Transfer (LSVT). It remains unclear, moreover, where this leaves the policy of rent convergence.
In her Press Release, the Minister said that "Ultimately, it is for each council to take up this offer of support, but I would expect them to ensure their tenants receive the full benefits." A little more detail was given in her statement to the House of Commons:
“I am therefore quite exceptionally prepared to offer authorities the opportunity to bid for additional subsidy, if, and only if they are preparing to revisit the level of rents set and reduce them by that amount.” And
“We will be inviting authorities to let us know whether they will take this up by around the end of April. They will be able to introduce the new rent increases as soon as is practicable for them.”
Pre-Budget Report: public sector headline
As part of the Government's fiscal stimulus package, the Government will be bringing forward £3 billion of capital spending from 2010-11 into 2009-10 and 2008-09 "for housing, education, transport and other construction projects, supporting industries and jobs across the country." Current overall spending is assumed to grow in real terms by 1.3 per cent in 2011-12, 1.2 per cent in 2012-13 and 1.1 per cent in 2013-14.
However, there will be "an additional £5 billion value for money target for 2 010-11"
Pre-Budget Report: detail for Housing
Details of the Chancellor's package of housing measures are set out in the supporting full pre-budget report on the Treasury website. They include:
1) Additional funding to ensure access to free and independent debt advice at the earliest possible opportunity for all householders in financial difficulty;
2) Establishment of a Home Finance Forum bringing together Government, regulators, industry and consumer groups to help protect borrowers from repossession, alongside commitments from mortgage lenders on fair treatment of borrowers facing difficulties;
3) Further strengthening of the Support for Mortgage Interest benefit and extension of the Government Mortgage Rescue scheme;
4) Bringing forward spending to stimulate the economy and ncrease housing supply through investing in social housing, the Decent Homes programme, regeneration projects and housing infrastructure.
The figures quoted in the full pre-budget report include £200 million on Decent Homes programmes to fund improvements and improve energy efficiency in 24,000 council homes, £150 million on social rented housing to deliver up to 2,000 more social rented homes and reduce the number of households in temporary accommodation, £175 million for major repairs to council housing stock, and £100 million to support key regeneration and housing infrastructure projects. The RDAs "will also consider the scope for bringing forward up to £100 million nationally to provide a fiscal stimulus to regional and national economic development;"
The Treasury has given the following example of what this will mean for London: "Bringing forward of investment in new social housing stock will help impact on the 13,800 households deemed in priority need of housing by local authorities in London. It will also help reduce the 54,000 currently living in temporary accommodation in London"
CIPFA chief responds to the pre-Budget report
Steve Freer, CIPFA Chief Executive has responded to the Chancellor's statement on the Pre-Budget Report on Monday 24 November. Steve Freer said:
"The size and scale of public spending increases are matters for the politicians - CIPFA's concern is that extra money is invested wisely and in a manner which is sustainable for the long term. It is critically important that the disciplines of good financial management are firmly to the fore. The planning of schemes and initiatives to help stimulate the economy can be expedited but it must not be compromised. Decision making must be as rigorous and robust as possible with proper regard not only for upfront capital costs but also for downstream revenue implications".
Gershon: Opening gambits
The options available and the issues local authorities can consider when looking
to make efficiency savings in their housing services. Click
here to download an article by Lesley Lodge featured in Property
People.
On the money
Choices for local authorities to make following the government's recent "efficiency
technical note". Click
here to read an article by Lesley Lodge in Housing
Today.
Prudential borrowing might be easier than you think
The option for local authorities to borrow to spend on housing standards is
already available. Click
here to read an article by Lesley Lodge in Housing
Today.