The £100 rent cap concession announced by housing minister Lord Falconer won a cautious reception in the sector, amid fears that a measure designed to meet problems in London could have unpredictable consequences elsewhere.

The National Housing Federation welcomed the rent limit, for which it had strongly lobbied to prevent rents in high value areas from becoming unaffordable. Head of research Danny Friedman said: “This gives welcome stability. People will go into a property knowing the maximum rents that will be charged.”

But the Chartered Institute of Housing complained that national policy was being pulled askew by the demands of the capital. Policy analyst Mark Lupton said: “London markets and [their] political impact are bending the principles of reform and dictating what happens elsewhere.”

Home Group chief executive Malcolm Levi added: “It is good that the government has recognised the need to have affordable rents for low income families in London. However, the need to make this change is explicit recognition that an artificial, imposed formula does not work.”

Orbit Housing Association warned the unexpected £100 limit could have grave effects if associations could not realise rents as high as they had expected.

Chief executive David Hucker said: “If income falls, associations will quickly be in breach of loan covenants. A number of associations will struggle with restructuring anyway, but if the government denies them income in areas where they expected to receive it they will be in real difficulties.

“Lenders will become more nervous each time the government tweaks the system.”

– Registered social landlords will be allowed to use their reserves to keep rents below target or cap levels, Falconer announced in a surprise concession.

He told parliament: “We have advised the chairman of the Housing Corporation that, where housing associations do not need to put their rents up in order to remain financially sound, they should not be pressed to do so.”

Falconer told Housing Today that this would not damage coherence: “We think the situation will get better as this goes on”. Friedman welcomed the increased flexibility, which he said recognised the affordability agenda for which the federation had argued. But Hucker claimed the notion of RSLs sitting on reserves and being able to “magic up money at the government’s behest” was a fallacy. Lupton and Levi also voiced doubts.

Others said the concessions would put RSLs under pressure from tenants to use reserves to keep rents down.

Source

Housing Today