Charges normally rise in line with the rate of inflation
Olena was grateful to be housed but concerned about impact on her health. Picture: BBC
A large rent rise for council tenants early next year remains a possibility as confusion reigns over whether a social rent cap will be introduced.
The matter was raised at a recent Hounslow Council meeting and a senior councillor admitted that she could not give a definitive answer to how much rents might increase in the next few months.
Cllr Sue Sampson, who has portfolio responsibility for housing told a recent Overview and Scrutiny Committee meeting that rents in Hounslow normally rise in line with interest rates plus 0.5%. With interest rates currently at 5% for local authorities, if the normal method of calculation is followed, then rents could see their largest rise for years just as households are struggling with rising prices. Nationally boroughs are permitted to raise rents by CPI plus 1% which would theoretically allow double digit percentage increases to take place.
A consultation is being held by the government and it is possible that council tenants and those accommodated by Housing Associations will not learn until January what increases will be announced in February.
Cllr Sampson told the meeting, “That is a pressure we will continue to fight as a local authority with all the London councils to try and have some form of control.”
The central government is consulting on proposals to put a cap on social housing rent increases which would be put in place for the coming financial year, with options at 3%, 5% and 7% being considered.
Housing Secretary Greg Clark said, “We must protect the most vulnerable households in these exceptional circumstances during the year ahead. Putting a cap on rent increases for social tenants offers security and stability to families across England.
“We know many people are worried about the months ahead. We want to hear from landlords and social tenants on how we can make this work and support the people that need it most.
“The rent cap would be temporary and would apply from 1 April 2023 to 31 March 2024. The consultation also seeks views on whether to set a limit for 2024-25. The government understands this will impact social housing landlords and is engaging fully with the sector.”
Following the consultation, a final decision will be announced later this year, to make sure landlords and council have enough time to factor this into their rent decisions for April 2023.
However, capping rent increases would put further pressure on local authority finances and it is unclear what support would be available from central government.
According to some estimates, a mandatory cap would lead to a loss of revenue of up to £1.2 billion for housing providers and £700 million for councils even if they were already planning to impose lower than inflation rises.
Industry analysts say there would be a broader impact of a social rent cap beyond the short-term loss of revenue. The inability to assume that revenues could be matched to costs would make financing more difficult and reduce long term investment in the sector. It is also claimed that this would reduce the decarbonisation of housing by discouraging investment in programmes to boost energy efficiency such as the replacement of gas heating with heat pumps. Some councils may struggle to keep up with basic maintenance due to a shortfall in the housing revenue account.
Peter Thompson, Leader of the Conservative Group on Hounslow Council and Councillor for Chiswick Riverside, "We are concerned that the lead member for housing seems unaware that council rental increases in this borough are based on CPI, not on interest rates. Once the lead member has got a handle on her brief, she should look at mitigating any proposed rental increases by utilising un-ringfenced grants money, such as the £2 million New Homes Bonus. Increasing council tenant's rent during the current economic climate is a political choice that the council can avoid: we urge them to do so."
A council spokesperson said that it was still awaiting guidance from central government on whether they will be a social rent cap and therefore was unable to comment on the likely level of rent rises.
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November 11, 2022