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News

Are rents likely to reduce as September RPI is -1.4%?

Date issued: 15th October 2009

Following concern over the RPI figure for September 2009, upon which housing association rent increases are based, the figure has been published as -1.4%.

This will mean that rent changes next year could mean rent reductions as the rent restructuring formula is based on the RPI figure, as published in the preceeding September (but see below).

The NHF in its response to the Government's consultation on "Directions to the Tenant Services Authority", is currently arguing that the rent restructuring formula is aimed only at controlling rent increases and does not apply to rent reductions and so the position is, perhaps, still a little uncertain.

Associations have argued that the effect of reducing rents next year, which will have a roll-on impact in all future years, will be to put financial pressures on them that may lead to reduced new homes delivery and lead to a reduction in their activities that support local communities such as work creation and tackling financial exclusion.

Rent restructuring 'guidance' requires that rents should change each year by no more that 0.5% above inflation +/- £2 per week. By use of the +£2 option social landlord should be able to avoid rent decreases and may be able to achive modest rent increases despite the deflationary RPI.

It can be understood that as financial pressures hit associations they may see the need to trim back on some of the peripheral work that they currently underatake and look for efficiencies within their existing processes. This doesn't necessarily mean trimming jobs but perhaps reviewing how things are done may be enough to sustain associations' 'housing plus' activities.