Housing assocations have been warned they face a very tough year after the government announced a dramatically reduced Retail Price Index rate
Housing associations will have to hold rent increases to half their current rate as the Retail Price Index rate for September - the figure used for the RPI plus one envelope - was only 1.1 per cent.

This means that associations will have to hold rent increases to 2.1 per cent next year.

Rent rises are currently held at 4.2 per cent due to a much higher RPI rate last year.

It also means that councils' rent increases will far outstrip housing association rises, because next year council rents are fixed to inflation plus 2 per cent.

Housing Corporation director of regulation Clare Miller said: "Housing associations will need to look at the effects of this on their long term planning."

She added that if associations had based forecasts on higher figures "they should revisit their business plans and do some sensitivity analyses and see if they can meet their loan covenants. If they can't they should come and speak to us."

National Housing Federation director of policy Liz Potter said: "It's going to be very tough for RSLs, because it is a dramatic reduction on the rent envelope that they have been working to."

Potter added: "What we need from the Housing Green Paper is a look at the longer term sustainability and rent reform programme rather than a system that preserves existing inequalities."

Council of Mortgage Lenders deputy director general Peter Williams said: "The housing association sector has got to get used to it. If you look into the future nothing is going to be any better. People are going to have to look for greater efficiencies".

He added: "It could make life difficult for some housing associations, but controlling rents and keeping them affordable should be a very high priority."

Source

Housing Today