Transcript Title of presentation EVENT DATE

ARCH General Meeting
Rent Policy Changes
Simon Smith
23rd September 2013
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Business planning and rents
• Current system – rent convergence
– Declining rate of increase in the run up to convergence
– RPI+0.5%+’negligible’
– Smoothing the path to convergence is not uncommon
• Spending round announcement
– RPI + 0.5% to CPI + 1% from 2015/16 (for ten years)
– End of rent convergence
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MfH Commentary
• It has been suggested that we’re looking to seize control of
council rents. This is not the case - we do not intend to
regulate council rents.
• Quite reasonably, we do expect councils to limit costs to their
tenants. If they do not - and we see rents jumping far above
inflation - then we retain the power to act to protect tenants.
• We are taking strong action to protect councils from the risk of
increased arrears: through ensuring that people who need
additional support to cope with paying their rent get the help
they need, and through an absolute limit of two months on
any arrears.
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What does it mean?
• CPI change moves rents in line with benefits/pension uprating but
link broken in short term
• CPI forecast to be lower in the long run leading to lower rent
increases
– Hold cost base to CPI + 0.5% = no change to current assumption
for many
• Removal of convergence a potential loss (significant in some cases)
of revenue to business plans
– Is it affordable? What needs to change?
• What happened to equity between social renters?
• National rent policy incoherent – affordable rents v social rents v
benefit bill
• CLG consultation due in October on detail
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Estimate of convergence loss
• £1.2 billion
• Based on distance from convergence from ‘limits’
mechanism at settlement
• Underestimate (?) as does not include those not subject
to ‘limit’ restrictions
• Includes 5% re-let to formula on a reducing balance
method
• Need property level data for accurate assessment
• Caveats…caveats…caveats
• Settlement re-opener?
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Loss of convergence
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What can be done?
• Time for a more fundamental review of rent
setting approach? What could that look like?
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Rent policies – towards flexibility?
• Government control - how?
– Introduction of Universal Credit... but includes a ‘housing
amount’
– Will government want to cease control of LA rents in the
round?
– DWP announcement and policy thinking remains unclear
around the successor to limit rent
• Drivers for rent flexibility?
–
–
–
–
Social vs. affordable – limit rent issue without HCA grant input
Flexibility beneath limit rent – many £s below
Flexibility within the average rent
Flexibility around welfare reform implications?
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Local policy considerations
• Two dimensions
– Level of rents - compared to market
– Affordable, social and anywhere in between
– Options to develop differential rent setting policies for
different properties (not just for new build)
• Distribution of rents within a local policy framework
– Rent restructuring ‘flattens’ rent differentials
– Originally a focus on ‘affordability’ but further away from
the market
– Private rented sector everywhere bigger than 12 years ago
– What are the options?
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Options?
• Social rent formula
– Future – could there be flexibility within an envelope?
– There already is!
• Affordable or other form of link to the market
– Basis for assessment, update and review – is RPI+ feasible?
• Rent points system
– Format linked to both values and amenities
• Income-based, linked to ability to pay
– Pilot and research studies carried out
– Linking to welfare reform considerations
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