letter from DCLG explaining in more detail how the new rents
policy announced last week is likely to apply to council
housing. The government proposes that, from 2015/16, council
rent increases will be limited to the increase in the Consumer
Prices Index (CPI) plus 1 per cent. There will no longer be an
additional allowance for convergence with local housing association
rents, despite the fact that in many councils rent convergence will
not have been achieved by that time.
The reason given for linking rent increases to the CPI rather than
the Retail Price Index (RPI) is that the National Statistician has
advised that RPI "does not meet international standards"; CPI
will provide "a more stable footing" for future rents.
Commenting on the impact of this change, CLG points out that, over
the last twelve months, CPI has increased by around 0.5% less than
RPI, which makes RPI plus ½% and CPI plus 1% equal.
However, the letter fails to point out that the gap between CPI
and RPI has been wider in the past and is expected to be wider in
the future. And in the Policy Costings published on the Treasury
website last week, the change in policy is predicted to save over
£700 million in housing benefit spending in the three years from
2015/16 - taking councils and housing associations together, which
must imply that the government expects the new policy to lead to
lower rent increases.
The costings also predict additional savings of around £300
million over the same period from councils undertaking less new
CLG will consult formally on the proposed changes in due