The Council has always carefully considered the effects that rent increases have on tenants, and have for many years attempted to limit rent increases while still delivering an effective and efficient service that met tenants' aspirations. To a large extent this is reflected in the success of its Best Value work and the way in which the Council has managed to limit its rent increases. The results of the 2000/01 independently conducted tenants survey highlighted that 77% of tenants think the rent for their homes represents very good or fairly good value for money.
Following on from the publication of the Housing Policy document and in particular, the "Guide to Social Rent Reforms", the Council has spent some time considering the effect that this policy will have on its strategy.
The Council believes that its approach in the past has been in line with many of the policy objectives set out by Ministers in the Housing Green Paper, particularly that social rents should remain affordable in the long term and that social rents should be fairer and less confusing for tenants. Due consideration had also been given to introducing a rent system that reflected the properties and the amenities provided, though that has now largely been overtaken by events.
For the purposes of this round of Business Planning we have undertaken the following:
- identified groups of suitable properties that can be banded together in homogenous areas;
- undertaken sample valuations using information supplied by the valuers who undertook the Beacon Valuations exercise, together with Right to Buy information;
- initially started to separate out service charges in line with the commitment to make Service Charges more transparent in the longer term;
- calculated sample target rents for these properties, based on the formula prescribed in the Social Rent Guidance.
The rent increases within the Business Plan have been estimated using the information above and extrapolating them over ten years, with a regular increase. Following the 1% increase on target set out for 2002 and 2003, we have assumed a 1% increase on target over the remaining years. Current rents are already very close to the calculated target figure, and as such, demonstrate that the Council is able to meet the requirements of rent convergence within the specified timescales. These figures have been included within the Business Plan.
The recent consultation document suggesting that post 2003 increases may be at 1.5% above inflation would lead to greater rent increases for tenants in the future than have been allowed for within the plan.
Our previous strategy was to apply rent increases so as to remain at guideline rent. We note that the DTLR has recently consulted with Local Authorities on the potential changes to the subsidy system to take account of rent reforms and look forward to including the findings within next year's plan. However, the approach that we have previously taken complements the preferred option of the DTLR and is likely to be the approach that we will continue to follow in the future.
Before rents can be set for next April, the Council will be undertaking greater analysis of the current position and likely options and discussing these further with the Tenant and Leaseholder Consultation Framework.
Sample Rents Table*
| |
One Bed |
Two Bed |
Three Bed |
| |
Valuation £37,800 |
Valuation £48,600 |
Valuation £53,100 |
| |
Target Rent |
Net Rent |
Target Rent |
Net Rent |
Target Rent |
Net Rent |
| 2001 |
£44.26 |
£44.31 |
£51.46 |
£51.69 |
£54.74 |
£55.38 |
| 2002 |
£45.81 |
£46.12 |
£53.26 |
£53.78 |
£56.66 |
£57.57 |
| 2003 |
£47.41 |
£47.93 |
£55.12 |
£55.87 |
£58.64 |
£59.75 |
| 2004 |
£49.07 |
£49.74 |
£57.05 |
£57.96 |
£60.70 |
£61.94 |
| 2005 |
£50.78 |
£51.56 |
£59.05 |
£60.05 |
£62.82 |
£64.12 |
| 2006 |
£52.56 |
£53.37 |
£61.11 |
£62.14 |
£65.02 |
£66.30 |
| 2007 |
£54.40 |
£55.18 |
£63.25 |
£64.23 |
£67.29 |
£68.49 |
| 2008 |
£56.31 |
£56.99 |
£65.47 |
£66.32 |
£69.65 |
£70.67 |
| 2009 |
£58.28 |
£58.80 |
£67.76 |
£68.40 |
£72.09 |
£72.85 |
| 2010 |
£60.32 |
£60.62 |
£70.13 |
£70.49 |
£74.61 |
£75.04 |
| 2011 |
£62.43 |
£62.43 |
£72.58 |
£72.58 |
£77.22 |
£77.22 |
*Table assumes average rents for property types, valuations based on January 1999, inflation at 2.5% throughout and increases to target rents at 2% for year 1, 1% after. Rents are calculated on a 52 week basis.
The table above demonstrates the early calculations that have been carried out. Future work will encompass breaking down the properties into smaller groups, and calculating the likely effect on different types and sizes of property.
Although these figures are based on averages, and there is considerable variation within the stock, the graph below demonstrates how close the current averages are to rent convergence. However, this would change if a 1.5% increase in formula rents were applied in the future.
The graph represents the likely pattern of increase that would be faced to achieve the formula rent for the average two-bed property, should the formula rent increase at 1% after the current known increases have been allowed for. The preferred route for the Council would be to move the current rent in ten equal steps towards the rent target anticipated in year 10, with annual recalculations, subject to further discussions within the consultation framework.
