Currently the Housing Corporation grant rate model relates locational variations in rents to incomes, and over the last decade this has significantly narrowed the regional differentials in RSL rents. In contrast the current local authority subsidy system relates rents to a mix of local capital values and county level earnings.
The result of these different approaches are that the regional differences in rents are now greater in the council sector, and more constrained in the RSL sector. Moreover in the years ahead, with the advent of resource accounting, councils will need to take greater account of the current capital values of their stock, although this does not in itself mean that rent policy must necessarily be based on capital values.
Extended debates on the principles and mechanisms of rent policy can be expected once the Green Paper is published. Ultimately the decisions on rent policy will reflect the balance of priorities for different policy objectives. In this context Table 1, which is published in this year's Housing Finance Review, gives some indication of what this could mean in practice. This shows the average capital values of dwellings in each of the main tenures, and indicates the potential extent of regional differentials in rent levels that could arise in the event that it is decided to relate rents (in part or in full) to capital values.
The table shows, for example, that the average capital value of RSL dwellings in London are 88 per cent higher than in Yorkshire and Humberside. This differential is far higher than is the case with current RSL rents, which are just 30 per cent higher in London compared to Yorkshire and Humberside. It should be recalled, however, that back in 1990 RSL assured tenancy relet rents were 79 per cent higher in London compared to Yorkshire and Humberside - much closer to the regional differential in capital values. In contrast average manual earnings in London are just 18 per cent higher than in Yorkshire and Humberside.
If the government's primary concern is housing market efficiency, then logically the local and regional profiles of rents in the council and RSL sectors will be related in some fashion either to capital values, or private sector rents, and this will lead to some widening of the regional distribution of RSL rents; reversing the impact of the Housing Corporations income-related policies over the last decade.
If, however, a stronger priority is given to concerns about affordability, and welfare to work and social exclusion objectives, it would be more logical to relate locational rent variations to the profile of earned incomes at the lower end of the job market.
This would imply relatively little change from the current locational profile of RSL rents.
A compromise between these conflicting objectives could result in some widening in the extent of regional rent differentials, but to a much lesser extent than would be the case if rents were directly and fully linked to capital values.
It is also interesting to note that the average capital value of RSL dwellings nationally were some 17 per cent above the average for council dwellings in 1996. In most regions, however, there is little difference between the average value of council and RSL dwellings.
The main reason for the difference in average values at the national level is the different locational distribution of the council and RSL stock.
It follows from this that even if council and RSL rents were set within a common policy framework, to the extent that rent policy was related to capital values, there would not need to be any significant narrowing of the headline gap in the national average rent figures for the council and RSL sectors. If, however, rent policies are not strongly related to capital values, a common rent policy framework at the local level would be likely to result in a substantial measure of convergence of the headline national average rent figures for the two sectors.
Source
Housing Today
No comments yet