As Housing Today reported last week (15 August, page 7), councils are faced with having to cut back repairs services to ensure their Housing Revenue Accounts do not slip into deficit. This would jeopardise their chances of meeting the 2010 decent homes target, and in many cases the only alternative is to transfer stock.
Despite being soundly rejected by tenants in Birmingham and elsewhere, stock transfer is still the government’s preferred way of improving social housing.
A Housing Today survey of 30 local authorities in England confirmed that councils are treating restructuring seriously.
The majority of the councils said that their HRAs would be hit hard by the costs of rent restructuring, although many said that it would be possible to absorb these costs through cutbacks in services, such as maintenance and repairs.
Herefordshire council said rent restructuring had been an important factor in its decision to transfer its 6000 homes to Herefordshire Housing.
Herefordshire council has historically kept rents artificially low. But because of rent restructuring, tenants’ weekly rents could rise by up to £8 over the next 10 years. Traditionally, almost half the council’s rental income has been lost locally through the government’s subsidy system.
Because of this drain on its finances, the council decided stock transfer would offer tenants greater value for money. Following a ballot held in March this year, transfer is expected to take place by November.
The government has made it clear that it is not its intention to allow a reduction in services
Gwyneth Taylor, LGA
Meanwhile, Nottingham council and Craven council in Yorkshire both predicted rent increases to meet target rent levels. They are both seriously considering stock options, including transfer.
However, some financially stretched councils considering stock transfer have found that rent restructuring may make such a move unviable.
A spokesman at Gloucester council said the value of the authority’s stock would fall by £30m to £17m as a result of rent restructuring. He explained that this drop would be caused by a fall in rents, cutting £1.2m from the council’s rental income by 2010 and thereby ruling out the option of stock transfer.
Commenting on the predicament faced by a significant proportion of councils, LGA programme manager Gwyneth Taylor said : “The situation hinges on having knowledge of what the management and maintenance budgets are going to be.
“Councils are having to plan more than 10 years in advance on the basis of assumptions that might not be correct. The government has made it clear it is not its intention to allow a reduction of services.”
A spokesman for the Office of the Deputy Prime Minister said it had always been known that rent restructuring would create winners and losers.
Source
Housing Today
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