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London
Tenants Federation - BRIEFING - September 2002
RENT-RESTRUCTURING
What
is rent restructuring?
The government
has made changes to the way in which it subsidises the Housing Revenue
account (HRA) and has introduced rent restructuring. The restructuring
began this financial year and the government intends that it be
completed within 10 years.
70% of the formula
now used to assess our rents is based on local manual earnings and
a bedroom weight and 30% on local (individual) property values.
The government determines figures for local manual earnings. They
have also produced guidelines for the valuation of properties. About
a third of London councils have so far introduced rent restructuring.
The government
has capped rent increases. They should not increase by more than
£2 per week + Retail Price Index (RPI) + 0.5% a year. A maximum
rent level has also been set. This year, none should be higher than
£100 per week for a 4-bed property, £95 for a 3 bed,
£90 for a 2 bed and £85 for a 1 bed. The maximum rent
level will increase by RPI plus 1% each year.
The government's
reasons for rent restructuring - what they say.
The government
says that its reasons for rent restructuring are to achieve -
- rents that
are fairer and less confusing for tenants;
- a closer
link between rents and the qualities that tenants value in properties;
- the removal
of differences between the rents set by local authorities and
those set by Registered Social Landlords.
Reforming housing
benefit is also high on the government's agenda. In order to carry
this through it wants to deal with the variety in social housing
rents.
What are
the issues for tenants in London?
- The new formula
for assessing rents means that they will go up in high property
value areas and down in low property value areas. Clearly this
has greatest effect in London - particularly in central London
where property prices are highest. For example in Camden it is
estimated that by 2011/12 that average rents will be £21
higher than in 2001/02
- There could
be wide differences in rents across boroughs where there are large
property value variations and result in different segregations
of council housing and tenants. It is currently estimated that
there will be a £10 rent difference between the north and
south of Islington.
- Council rents
will rise to the level of housing association rents. The convergence
of rents for LA and RSL rents appears to be aimed at removing
one of the reasons that council tenants reject privatisation (stock
transfer). Maidstone Borough Council's booklet on rent restructuring
'All Change with Rents' states "As you know the council is
considering whether to ballot you on transferring your homes to
a new or existing RSL. Because the government wants to make all
rents the same level, it now doesn't matter who is your landlord".
(It is worth noting that in areas where the rents will be cut
housing associations are worried about their future viability
because they have to pay off large private sector loans - especially
those that have taken over council homes).
- Councils
that set average rents below the formula rent will lose HRA resources
by the full amount that it is below the formula rent.
- The government
has centralised the way in which rents are set - taking away debate
and decision making at a local level - impacting on local democracy.
- Rent increases
in London are likely to force more tenants immediately into dependency
on housing benefit.
- The government
is proposing changes in housing benefit. Plans that could lead
to a cut in entitlements for millions of tenants are to be piloted
in a few areas according to the Guardian (02.07.02). Rent increases
and cuts in entitlements are likely to increase the number of
evictions. The government favours tenants 'shopping around' for
housing or as most of us understand it, forcing tenants whose
homes are in expensive and 'desirable' areas to move to areas
that are less desirable, facilitating further gentrification in
many London boroughs.
- The property
value of our homes is of interest to those buying, but for many,
the qualities we value in our homes relates to our community and
neighbourhood - our friends, family, neighbours and local facilities.
Forcing those unable to pay from areas of high property values
damages our communities.
- The government
proposes separating service charges from our rents. (See Briefing
Sheet 2 for details on the proposals)
- There is
no legal requirement for local authorities to implement rent restructuring
although there are heavy financial penalties for councils who
do not.
The government's
policy for social rents was set out in it's December 2000 policy
statement - 'The Way Forward for Housing'. Further details were
issued in 'A Guide to Rent Reforms'. Proposals were made in a consultation
paper - 'HRA Subsidy and Rent Restructuring' - 2002-03.
More
on Rent Restructuring
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