Raynsford signals freeze on grant rate

In his first major decision as housing minister Nick Raynsford has opted to hold the grant rate at 54 per cent. He also signalled a further clamp down on rents.

Announcing the move Raynsford said: "Our policy of maintaining the grant rate combined with the reductions in interest rates has been successful in limiting the rents charged on new properties. It reflects the importance that the government attaches to restraining the increase in rents charged by RSLs."

In a letter to the Housing Corporation, Raynsford also signalled a further tightening on rents.

He says: "I should be grateful if the corporation could aim to use the available controls in order to continue to limit the increases in average new build rents to modest levels and well below the RPI plus 1 per cent limit for existing stock."

Raynsford's attacks in opposition on the previous government's grant rate cuts suggested that he might go further by increasing rates.

But instead he has opted to freeze rates for the second year in a row. Raynsford's predecessor Hilary Armstrong cut the rate from 56 to 54 per cent in 1997.

The freeze comes after associations reversed the cutthroat competition of previous years by bidding much closer to the headline rate grant (Housing Today, issue 112).

There was a mixed reaction from housing associations. Orbit HA chief executive David Hucker said the freeze was not enough: "Holding the grant is going to be no help to us at all. If you want to build what is required at lower rents the grant rate has got to go up."

But National Housing Federation head of investment Alastair Jackson said: "We are delighted that the government has continued to emphasise affordability by holding grant steady. Obviously this is only one part of the affordability framework, a lot rests on the forthcoming green paper."