£15m bonus for BME associations struggling with rent restructuring

BME associations with current rents 10% higher than target rents will be eligible for the help, which "should take the form of capital payments to help financial restructuring" according to a letter from Rooker to association chief executives last week.

The letter said only a minority of BME associations are likely to qualify for assistance, to be paid out over the three financial years starting from April 2003.

The move follows a report last month by consultant Hacas Chapman Hendy which said that five out of eight BME associations based outside London faced financial ruin under plans to cap housing association rents.

Part of the problem facing BME landlords is that the traditional method of calculating rents does not take into account the typically large homes used in the BME sector to accommodate tenants' extended families.

The Federation of Black Housing Organisations welcomed the fund. "This is a step in the right direction, particularly as there was talk only recently that nothing would be made available," said a spokesman.

Capital, not revenue, payments, are the right approach if the government wants an effective BME sector

Mark Lupton, CIH policy analyst

Chartered Institute of Housing policy analyst Mark Lupton said that capital – rather than revenue – payments were the "right approach to take if the government wants an effective BME sector". Revenue expenditure covers day-to-day costs; capital spending finances longer-term activity, such as building homes.

The BME sector needs support, said Lupton, as it lags behind other housing associations in terms of developed properties.

Plus, many BME associations are based in the north of England and the Midlands – areas where, unlike London, rent restructuring would bring rents down.