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London
Tenants Federation - BRIEFING - September 2002
RENT-RESTRUCTURING
& SERVICE CHARGES
In June 2002 the government
produced a consultation paper relating to further changes in HRA
Subsidy and rent restructuring. The consultation contains proposals
on separating service charges from rent. The government is asking
for views from councils and tenants. Registered Social Landlords
(RSLs) ordinarily separate out service charges from rents but currently
only a few councils do. The government says that separating service
charges from rents will increase 'financial transparency' and bring
the system in line with RSLs.
What exactly is the
government proposing?
- That councils have
discretion to decide what services it is appropriate to charge
for.
- That councils be given
progressively stronger financial incentives to introduce service
charges. It is proposed that local authorities will be allowed
to keep revenue raised from levying service charges. HRA subsidy
ordinarily decreases as rents increase - but the government proposes
that subsidy will not decrease as service charges increase.
- That there be limits
on increases in existing service charges so that rents plus service
charges will not increase more than £2 + RPI plus ½
%.
- That the maximum rent
level (£85 - £100), only apply to rents and not to
service charges. (see Briefing 1 for details on rent limits and
maximum rent levels)
- That local authorities
avoid levying service charges (or reflecting the true cost) for
services like lifts in high rise flats. The cost of servicing
large estates and high rise blocks is higher than for street properties.
The government proposes that what should and should not be charged
for, be left to 'local judgement'.
What are the main
issues for tenants?
- There appears to be
nothing of benefit to tenants in these proposals. The introduction
of separate service charges has huge implications for London tenants
and indeed for the existence of 'affordable' housing here - particularly
in the central London.
- The maximum rent levels
set by the government will only apply to rents, not to service
charges. Service charges could still be applied above the maximum
rent level. The likely outcome is that those unable to afford
to pay the rents and service charges will be forced out of expensive
property value areas. Our communities will be damaged as a result
and certain areas will be exclusively for the wealthy and trendy.
- Evictions as a result
of arrears could increase and more will be forced into dependency
on housing benefit.
- Service charges are
about housing management. They reflect the nature of council housing
stock and local neighbourhoods. Most local authorities have older
and larger estates than those belonging to RSLs. What guarantees
are there for those of us living on estates that require high
levels of services that will not have to foot the bill, particularly
in relation to new services?
- Any new service added
after the separation of service charges from rents will not be
subject to limits. Will we only be able to have the new services
that we need, if we can afford them?
- Services that have
only recently been introduced on our estates - such as CCTV and
neighbourhood wardens will have a huge impact on service charges.
Residents living in areas that have huge problems in relation
to anti-social behaviour could end up being penalised for those
problems by having to pay higher service charges.
- Currently separate
service charges don't effect eligibility for housing benefit.
Can this eligibility be guaranteed, when the government intends
to make changes to housing benefit and to cut entitlements?
- The separation of
service charges - to bring councils in line with Registered Social
Landlords, as with the aligning of the cost of council and RSL
rents, seems to be aimed at removing tenant's arguments against
privatisation (stock transfer).
- Although there would
be no legal obligation for councils to introduce separate service
charges, the government is offering bribes or progressively stronger
'financial incentives', in an attempt to achieve the desired result.
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 issued last year - 'HRA Subsidy and Rent Restructuring'
- 2002-03. The consultation paper relating to service charges was
produced in June 2002.
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