Peabody asks Corporation for rent restructuring waiver

The Peabody Trust is in secret talks with the Housing Corporation about allowing it to waive its obligations under the rent restructuring process.

Home Group is also involved in similar, but separate, talks.

The rent restructuring process began in April last year and is designed to harmonise registered social landlords' rents with those of councils. It limits the rate at which rents can be raised per year.

Peabody hopes its talks – set to be concluded in the second half of 2004 – will allow it to levy higher rents sooner on properties in which it has invested to meet the decent homes standard.

The trust says that otherwise, the target rent level for 2012 that it agreed with the corporation in 2000 will not be achieved as it will be unable to raise its rents quickly enough.

This shortfall, plus an overemphasis on developing homes rather than investing in existing stock, led it to cut 51 jobs in December, in order to save £3m-4m and allow it to meet the 2010 decent homes standard.

The trust also points out that its current rents are often below those of other social landlords in the same areas (see "Rents disparity", left).

The trust hopes to be allowed to raise its rents to the same level as these other landlords .

Caroline Pickering, the trust's interim chief executive, said: "The present situation means we have to cut back on providing new homes for people who need them most. This cannot be right. It is a catch-22 situation.

"We have asked for a waiver of the existing rent regime to help us fund decent homes. Nobody has been allowed to yet, but there is a first time for everything. We are up against it if they stay as they are."

Home Group's discussions about waiving some of its rent restructuring obligations stem from the fact that about 14% of its 46,000 homes do not meet the decent homes standard. About 10,000 of its properties are street properties last refurbished in the 1970s, or were built in the 1930s. All are expensive to refurbish so the group hopes to raise its income.

Jon Watson, director of business strategy at Home Group, said: "We will continue to lobby the corporation about the over-tight rent restructuring programme."

Watson said the dialogue was part of an ongoing relationship with the corporation and that the association was putting together an asset management strategy to meet the decent homes target.

The corporation presently allows rent restructuring waivers to associations that can prove financial difficulties would be caused otherwise, as detailed in its National Investment Policy. A spokeswoman said it had issued "fewer than 100" waivers to date, but that it was unknown how many related to decent homes.

Corporation chair Peter Dixon said: "I do have sympathy when we are looking at a less restrictive rent regime, if it would allow an association to meet the standard."

In a further attempt to raise cash, Peabody is also hoping to sell more street properties.

"We are in dialogue with the corporation about increasing our disposals programme from 30 a year to about 100," said Pickering.

"We hope to double that again the following year. The sales of street properties in outer London, where sadly the costs of investment outweigh the benefits, will form the majority of these."

Peter Walters, chief executive of English Churches Housing Group, said he was also putting together an asset management strategy: "We may have to shift resources away from development into stock improvement. Rent restructuring takes away our financial flexibility." to deal with these issues."