Tuesday, 18 November 2014

Do we need a national reasonable rents policy for social housing?

I was talking to colleagues last week about affordable social rents; the issue was that in some areas in the UK they're not affordable!  An affordable rent can be a misnoma. An affordable rent is 80% of a market rent. A market rent in central London for example might be way beyond the reach of the average social tenant. Just because the affordable rent is 80% of market doesn't make it automatically affordable.

It is an interesting point that there is a lack of a debate about what social housing rents should really be.  Although there is a national model it is based on relative rather than absolute rents.  What l mean by this is that we take into account average incomes in an area compared to the UK as a whole to have a relative benchmark across the country.  We combine this with average property values to get parity across even smaller areas.  The latter means that when a housing provider sets its rent increase all the properties are proportionately charged the right rent RELATIVE to each other.

However...the ABSOLUTE level of rent (i.e. what is going to be charged next year on average compared to this year), isn't driven by a model that considers what the right rent should be.

Registered Providers and Councils have a model based on what they need to get in to provide a service.  Although everyone is thinking very seriously about what their tenants can afford there is no over-arching national model to refer to for guidance on what is a reasonable rent.

What would be helpful going forward is a debate about what rents should be relative to say local wages or benefit levels.  That way, for example, we could have guidlines about rents that rose no more than wages or benefits; or have a policy that rents should be no more than x% of the average wage.

However, this all ties back for local authorities to the HRA model and debt burdens.  If a national model meant some rents in some areas were deemed too high, then the Council would be in a Catch 22 if it had to drop the rent but still service the old level of debt.  The debt has to be paid for - so the service would suffer.  If we ever had a national model for 'reasonable' rents it would need linking in to a review of how much debt Councils were given to service when the self-financing model kicked off.  Without this the 'reasonable' rents might be affordable in a real sense to tenants, but not to the Housing Revenue Account!

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