Landlords: 'let us raise rent and we'll build 10,000 more homes a year'

In its submission to the Treasury ahead of July's comprehensive spending review, the NHF argued for the rent increase guideline to be raised from 0.5% above the retail price index to RPI plus 1%.

This would mean social housing providers could borrow about £25m more in private finance, it said in the submission, written jointly with the Chartered Institute of Housing and the Local Government Association.

At present, housing associations build roughly 14,000 homes a year.

"The more rent you can raise, the more debt you can service to fund investment considering today's relatively low interest rates," said Danny Friedman, NHF director of policy.

The NHF calculated average grant levels for 2002/3, average build costs, the private finance requirement per unit and the cost of borrowing to calculate the figures.

Friedman admitted that increased rents would increase the housing benefit bill, but said this cost would be offset by reductions in the level of grant required. He said: "The overall level of public subsidies would be retained. We are saying the weighting between housing benefit and grant could be different.

The more rent you can raise, the more debt you can service to fund investment

Danny Friedman, National Housing Federation

"Over the past few years, rents have been carefully controlled while the level of grant has increased. But the number of units produced has gone down. So we have looked at the relationship between benefit and grant."

Lester Hudson, assistant director of finance at Metropolitan Housing Trust, said he welcomed the NHF's proposal because of the additional funding it would raise for reinvestment in the trust's stock.

He said: "It would create further investment opportunities but, as the increase is relatively small, it wouldn't affect the affordability of rent from tenants' point of view."

Friedman said associations needed to be able to raise their own investment income rather than relying on grants if the building targets in the Barker Report were to be met.