Let me introduce you to a little bit of maths. Let us take a one-bedroom housing association flat in South Yorkshire and attribute to it an open market capital value in January 1999 of £30 000. Let us bear in mind that the average registered social landlord weekly rent in 2000 was £53.50. Add the information that the current average manual weekly earnings in South Yorkshire is £299.10 and that the national equivalent is £316.40.
Keep to hand the "weighting" of the property of 0.9 because it is a one-bedroom flat. Finally don't forget that the national average RSL property value in January 1999 was £49 750.
Now for the calculation. Take 70% of the average RSL rent in 2000 (£53.50 x 70%) to arrive at £37.45. Multiply that by the figure which emerges from dividing the local average weekly manual wage by the national figure (£299.10 divided by £316.40). That takes our £37.45 down to £35.40. Now apply the bedroom weighting of 0.9%. This brings us to £31.86. Put that £31.86 on one side because we will need it again shortly.
Meanwhile take 30% of the sector average rent - our old friend £53.50. This delivers £16.05. Multiply that by the relative property value which is £30 000 divided by the national RSL average of £49 750. The result of this is £9.68. Take that £9.68 and add it to the figure of £31.86 which we worked out a short while ago. Our grand total is £41.54. Hey presto - we have completed our sums.
But what have we worked out exactly? What we have just calculated is the target rent under the government's rent restructuring proposals for that one-bedroom flat in South Yorkshire. More precisely, we can work out, if we multiply £41.54 by the RPI over 10 years what that rent should be a decade from now. Or almost. Because in arriving at that we must not permit any rent to rise or fall by more than £2 per week in any one year.
Those who rejoice in the death of communism ought perhaps to reflect how a British government could land itself with rent control proposals of such excruciating complexity. They sprang, fully armed, calculator in hand, from the gleaming pate of former housing minister Nick Raynsford who argued (not altogether convincingly) that there was no hope of getting control of the housing benefit bill before the glaring anomalies in social rents had been addressed. His scheme was to achieve a large measure of rent equalisation across all social landlords over 10 years. The basic formula for arriving at the target rent would be based to the tune of 70% on earnings and 30% on capital values - the two figures in our calculation.
The start date for this great project is April next year. The Housing Corporation is issuing its second set of guidance in dribs and drabs. The demands for exemptions are beginning to come through the Corporation's door. While most housing professionals accept the case for addressing rent anomalies (often too high in the North and too low in the South) the measure is provoking real concern. The business plans of some associations -especially transfer associations whose funding was predicated on a cash flow from rent dependent on annual increases a point above RPI - have been shot to pieces. Having put an accelerated transfer programme at the heart of housing strategy, Raynsford is accused of having seriously undermined it.
One of the big providers, Bradford and Northern, with some 6 500 units under management, calculates that the 10-year cost of applying the restructuring proposals as currently envisaged will be £17m in "lost" rent. Meanwhile it is having to shell out to have the required sample of its property valued. Associations are not the only people alarmed. Some local authorities, faced with declining capital values and mounting voids are just as concerned about the relevance of the methodology.
The happy inheritor of this dossier is Charlie (Lord) Falconer. It may be dawning upon him that he is onto a loser offering major dislocation with no early pay-back in cutting the welfare bill, the real prospect of housing providers going bust, and some funders becoming wary about the rewards of the transfer market.
If he is going to extricate himself from this threatening quagmire he is going to have to take Nick Raynsford into a corner - and take the shine off his colleague's crusade. But the stakes are high. Some 30 local authorities are in the transfer programme for this year and next including six London boroughs, and
25 000 plus transfers in Bradford, Dudley and Walsall. But the granddaddy of them all is the Birmingham transfer of 88 000 homes which is undergoing a positively elephantine pregnancy. Falconer may not have been present at the act of creation of these policies, but he has got the messy job of midwifery.
Source
Building Homes
