Much of the problem stems from the system of channelling cash away from better-off councils towards those worse off.
Now that the government is setting rents which councils must charge according to a formula, reform has become essential. Some councils are set to lose large amounts of subsidy in the reform process. Some will lose out twice, because they must reduce their rents as well.
Number-crunchers at the Office of the Deputy Prime Minister are well aware of the problem and are to increase the amounts allowed for management and maintenance to compensate.
But management and maintenance spending is already 25% higher than the government allows for. Adrian Waite, director of consultant AWICS, says: "Management and maintenance allowances are unlikely to rise enough, so councils will have to make significant cost reductions to balance the books, as they must do by law.
"The question is whether councils can manage their stock on what the government allows. Maintenance is driven by demand, so will it be possible to cut spending?"
Rents need to be reformed to make them understandable – almost everyone who responded to the green paper said this. But some experts think the Treasury ended up adopting an idea already past its sell-by date because it mistakenly compared social housing to the private sector.
The formula that sets the rents is largely based on bricks-and-mortar values. It was set just at the moment when social housing woke up to the fact that tenants base their sense of value far more on the service provided: tackling antisocial behaviour, making the environment of the estate attractive, managing proactively and so on – the very things councils are being forced to cut back.
Chartered Institute of Housing policy director John Perry says: "There seems to be a problem getting the Treasury to understand that, after 10 years, rents relative to property will be consistent, but the service provided by different landlords may be completely different."
The sector can only hope that when rent restructuring ends in 2012, its goal will not have become merely last century's baggage.
Source
Housing Today
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