The government is coming under increased pressure to relax its line on inflation-only rents
The Department of the Environment, Transport and the Regions this week confirmed its modelling of rents included an RPI plus half a per cent option.

Lenders have warned they will not renegotiate loans for housing associations that are in technical default as a result of the RPI only rent rises proposed alongside rent restructuring in the housing Green Paper.

Now they are calling for a waiver allowing RSLs facing default to make above inflation rises.

And housing associations say they are already delivering on rents without the RPI-only framework. Latest CORE figures show rent increases to June for new lettings at 1.8 per cent without the straightjacket of RPI only.

Head of housing finance at Royal Bank of Scotland group Clive Barnett said: "On the basis of RPI plus zero my customers would be seeking to restructure lendings, but they won't be able to. We will not move lending back. And we would not be the only bank to take that decision."

"I understand that DETR's own modelling assumes cost inflation moving up at RPI plus a half." he said, "If the government's own modelling recognises the problems of inflation only increases, how are RSLs expected to be able to deal with it? The only way I think we will get payment is if the government allows them more than an RPI only increase."

Mark Hedges structured finance controller at Nation-wide bank said: "DETR have said they will not undermine the viability of the sector. We have modelled the impact of the proposal. The government will need to recognise RPI plus zero in a different way from how it expected."

A DETR spokesman said it was not uncommon for some RSLs to show technical default under rent modelling.

He also said DETR had looked at cost inflation rising at RPI plus a half: "RPI plus a half is one thing we have looked at. There are a whole range of things but at the end of the day what matters is what comes out of the Green Paper," he said.

National Housing Federation chief executive Jim Coulter said: "If there is movement on RPI then that's good news but we have no direct information.

"We have always said that the 10-year framework for RPI only is unacceptable. Our objective is to get government to agree to a three-year period with a monitoring programme to gauge the impact. The Core figures show RSLs are delivering - why do we need a rigid framework when flexibility is clearly working?"

Chartered Institute of Housing director of policy John Perry said a waiver would make a positive difference to RSLs.

The government will announce the result of its consultations on rents next month.

Source

Housing Today