LTF Briefing for Tenants and Residents Associations - July '04

3 YEAR RENT-RESTRUCTURING REVIEW

Huge Rent Increases Proposed

'Rent Restructuring', introduced in 2001 and being phased in over a 10 year period, refers to the fact that our rents are now set by a government formula. 70% of that formula is based on local manual earnings with a bedroom weight and 30% based on local (individual) property values.

Government's stated reasons for rent restructuring were to have rents that are affordable; fairer and less confusing for tenants; have a closer link between rents and the qualities tenants value in properties and to remove differences between council and Registered Social Landlord (RSL) rents.

A 3-year review of rent restructuring has been carried out recently. Its recommendations are now out for wider consultation.

Lack of Tenant Involvement in the Review

The Housing Corporation, the Local Government Association, the Association of London Government, the National Housing Federation, Department for Works and Pensions, Department of Health and the Council of Mortgage Lenders were all involved in the review.

But despite government proclamations that tenants should be involved in all decision making in relation to our homes and communities and 2 of the 4 aims of rent restructuring relating to tenants, no tenants took part in this review.

Consequences of the rent restructuring for London's tenants

London Tenant Federation (LTF) members have complained that since the introduction of rent restructuring, huge differences in rents are occurring across boroughs - for the same sized properties on similar estates with similar levels of services and repairs. They have asked if rent restructuring is simply about forcing social housing tenants from London especially from areas that have become 'more desirable' and where property values have gone sky high.

Given that no tenants took part in the review perhaps we shouldn't be too surprised that these issues were not addressed. The review members concluded that the basic policy is sound and have made 3 recommendations 'for technical improvements'.

The recommendations

1. Higher rents for larger properties. The review has suggested that there needs to be a noticeable difference in the rents charged for different sized properties and that rents need to increase for 3, 4, 5 and 6 bedroom (and more) properties - to signal the greater desirability of larger properties. If so, why not also reduce the rents for 2-bed and smaller flats?

2. Harmonisation. The recommendation is that from April '05, councils use the same formula for restructuring rents as that used by the RSLs.

The RSLs have miraculously produced valuations (of properties) that are 22% higher than the Office of the Deputy Prime Minister (ODPM) expected. It is these valuations that local authorities will be expected to adopt and it will mean huge rent increases. These valuations are apparently not to be queried. To make matters worse, the proposal would also retrospectively increase by 2% the April 2000 start rent in the RSL 'target rent' formula.
Clearly if 'harmonisation' - removing the differences between council and RSL rents, had been the real motivation of this review, RSL rents could have been lowered to council rents - on a formula that has not been hiked up by dodgy valuations produced by the RSLs.

3. Implementation. The review has recommended that where rents are to be reduced by the formula (which will happen in some areas where property values are very low - like in the north of the country) that current limits on how much they fall, should be ignored. This proposal does not really affect London tenants.

The impact of the review's proposals on London council tenants

The combined impact of rent restructuring and the reviews proposals will mean, on average our rents will rise £40 per month (15%) by the end of the rent restructuring period - 2011/2. This is far above the rate of inflation. Increases will of course vary from borough to borough, from £3 per month in Waltham Forest to an increase of £79 per month in Camden.

This means life will be much more difficult for pensioners with small occupational pensions who don't qualify for housing benefit. More of their pension will disappear in rent. E.g. a 70 year old pensioner with a total income of £12,000 per year and a current rent of £68 a week will have to pay a third of their net income in rent.

People in work will have to increase their earnings by a lot more than the rent increase to be no worse off. A tenant facing an increase of 14% on a rent of £80 per week would have to increase their earnings by £17 per week.

It will make it much more difficult for those claiming housing benefit to stop having to do so.

Who are the winners and who the losers?

Council tenants rents will indefensibly increase because the local authority formula for calculating our rents will be changed to an inflated and highly questionable RSL 'target rent' level. Having waved through extra rent rises for 1.7 million RSL tenants this proposal would increase 2.5 million council tenants' rents in the name of 'harmonisation'.

We won't even get better services as a result. The government already takes £1.5 billion more rent money than is returned to councils in allowances to repair and maintain our homes. The amount taken by government will simply increase at the same rate that our rents increase. It's a nice little earner for the government and will comfortably pay for the extra that will inevitably be claimed in housing benefit - a kind of tax on the poor to pay for the poorer.

Unlike councils, RSLs are able to keep extra rent charged. RSLs and the money lenders clearly had the loudest voice in this review and it is they, it seems, the government is most interested in listening to. RSLs will use the increased rent yield to fund development of new RSL homes.

RSL tenants like council tenants, were nowhere to be seen between the RSL and the Council of Mortgage Lender members of the review. They too will see huge rent increases and no better service delivery in return.

To help prevent these proposals being adopted, simply add your T&RA name and address to the post card, add a stamp and send. The post card must reach the Office of the Deputy Prime Minister (ODPM) by 30th September. Make sure tenants on your estate/block/street know about rent restructuring and the proposals from this review!

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