The Earth’s Orbit and Rent Accounting


by Ken Lee, Chair of the CIPFA Housing Panel

We are fast approaching rent-setting time in local authorities and housing associations. The need to give at least 28 days notice of any changes and the requirement in local authorities in order to have some democratic accountability around the level of rents, means that the pre-festive period is a busy time for the housing accountant.

The next financial year has a couple of quirks, one of which is related to the earth’s orbit. Both of them could cause some head scratching especially in the light of The Welfare and Reform Act 2016 and its imposition of 1% reductions on social rents.

The first is that it is a leap year and so, of course, tenants are due to pay for 366 days of service and not 365 days – we all know they should be paying 365.2422 days per annum, but we have leap years to sort that out. But many tenants will not be aware of that, thinking that they are charged on a weekly basis.

The second is that there are 53 Mondays in the period 01/4/2019 to 31/03/2020 and as rent periods in many cases start on a Monday, then tenants will face paying 53 weeks of rent in the year.  Again, although this is a practice that has continued for many years – the last one being 2013/14, tenants will need to be informed or reminded about it.

Of course, in some cases, tenants may be totally unaware of this, as they have rent free weeks and are therefore charged over say 48 (/49) weeks rather than 52/53.

The good old accountants know full well that under accrual accounting adjustments have to be made, so that the rent raised on 30th March 2020 includes five days that relate to 2020/21 rent year.

All this means that housing accountants needs to be very clear about what is payable and how they are charging for it. The Act is focused on what’s payable, but Benefits are focused on what is charged. Get it wrong and nationally there are some big sums involved. One estimate of the loss of one week’s rent is over £130m for local authorities. That is a significant number of new houses!

So the oddities of the earth’s orbit means that the sun set on 12 December in London is earlier than it is on the Winter Solstice – the shortest day (in terms of daylight hours) – don’t let these oddities mean that you lose out on rental income or that you brake the 1% rent reduction rules for 2019/20. The total rent payable for that year must be 1% less than in 2018/19!

This article first appeared in Public Finance Magazine.