DETR looks at damage limitation

The government has moved to address concerns that council rents could escalate under its plans to reform social housing rents.

Government plans for rent convergence in the housing Green Paper have already been widely criticised by housing associations which fear they could become financially unviable if rents are reduced. Now councils are warning the plans could lead to increasingly unaffordable rents in the local authority sector.

This week it emerged that the Department of the Environment, Transport and the Regions is to model the proposals in six areas across England to assess the impact in response to these concerns.

Local Government Association head of housing policy Paul Lautman said councils as well as RSLs were very concerned at proposed rent changes. He said: "The three options do impact very significantly on local authorities in terms of increasing the overall level [of rents]. It implies that convergence with RSL rents and for some authorities that could be quite a significant increase."

Lautman added that the LGA's response to the Green Paper would favour a model based on a 70:30 split between regional earnings and capital values. The LGA wanted the government to use different data to calculate its regional earnings, as used by two of the three models. He said: "[We are] looking at different earnings data that is more reflective of the incomes of social housing tenants."

Association of London Government housing policy officer Duncan Bowie said: "We have concerns about increasing differentials levels leading to increased social polarisation in the sense of people on lower incomes being less able to afford tenancies in better off areas. That is contrary to government objectives of mixed neighbourhoods."

He added: "If a [rents] formula leads to a significant reduction in local authorities" rents in a district, clearly there are some revenue consequences for the authority. We would need to be involved in discussing about changes to the subsidy system because an authority could not suddenly have its rent income reduced substantially."

The DETR research will be carried out by Bristol and Birmingham universities, who will investigate how councils and housing associations in six areas across England will cope with changes to the changes to rents. The project is due to finish in January 2001 and an interim report is expected to be available in September.

One of the DETR team said: "We recognised that inevitably there would be concerns with each of the rent options presented in the Green Paper."