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Housing Minister signals return to CPI+1% rent formula 07/01/2016

Brandon Lewis, Housing Minister, has signalled that social and affordable rents will return to an inflation-linked formula after the four year rent reduction period.


Mr. Lewis reaffirmed the policy in front of the Communities and Local Government Committee on Tuesday 15 December 2015.

 

Councils and housing associations were told by Chancellor, George Osborne, at the July Budget that social and affordable housing rents would be reduced by one per cent per year for four years from April 2016. Powers to compel councils and housing associations to reduce rents are included in the Welfare Reform and Work Bill currently before Parliament.

 

We estimate that the reduction over the four years will mean that by 2020/21 stock retained councils will suffer a drop in forecasted rental income of some £2.4billion and a loss of £30billion income over the 30 year business plan period. This will significantly affect the resources available for housing services and planned investment in building new council housing and investment in the existing stock.

 

Justifying the mandatory rent reduction, the Housing Minister pointed out that the reduction is a 'saving for tenants' and argued that social housing rents have been increasing 'higher and quicker' than private sector rents.

 

However, he said: "There's obviously an agreement that goes beyond that [period] already and I don't see any reason for that to change." (Q356 in response to a question from Helen Hayes MP).

 

The Minister's answer was given in response to a question on the impact of the rent reduction on housing associations. Stock retained councils will need to consider what projections of rental income should be included in their business plans beyond 2020/2021 in light of these comments.

 

The Minister also signalled that in making payments under clause 62 of the Housing and Planning Bill (to fund extension of the Right to Buy to housing association tenants) under the formula based approach:

 

"If a local authority wants to keep ownership of a particular local authority property, but pay off the required amount doing something else, whether it is from the General Revenue Account or selling off a different piece of land, that will be very much a matter for them" (Q315 in response to a question from Julian Knight MP).

 

This seems to indicate a high degree of flexibility in where stock retained councils find the resources to make the required payments to the government under this clause.  

 

In answer to a question from Helen Hayes MP (Q350) the Minister also announced that 'pay to stay' will only be mandatory for council house tenants saying that the scheme "will now be voluntary for housing associations" but that he "expected the majority of housing associations will consider operating(a 'pay to stay')policy".

 

Read thefull transcript of the Minister's responses to questions.

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