Inside Housing reports that the Government plans to ditch the convergence element of its rent setting formula: designed to achieve parity between local authorities and housing associations.
This, says the article is, ‘a surprise move that was not announced as part of the rent settlement in last month’s spending review’.
Earlier this month the Association of Retained Council Housing (ARCH)received a letter from the Department for Communities and Local Government (DCLG) addressed to its Policy Adviser, Matthew Warburton. This goes into more detail about the new rental policy, explaining how it is likely to apply to council housing. The letter (dated 2 July) includes a rather revealing phrase, quoted in part by Inside Housing:
‘Having considered the issue carefully, we are minded not to extend rent convergence beyond 2014-15 – and the policy costings published by the Office for Budget Responsibility are based on that assumption. So when we say rent increases of up to CPI + 1% from 2015/16 onwards, that is what we mean.’
It’s worth mentioning that this is not the end of any debate around rent setting and the full implications of abandoning convergence. Although DCLG wrote, ‘We think CPI + 1% strikes the right balance and represents a good deal for both landlords and tenants’, it went on to say:
‘We will of course consult on the new rent policy, including proposals for ending convergence. We will set out further details on our proposals at that point.’ Clearly, social landlords will have a chance to comment on any proposed changes, and may prove instrumental in influencing further policy decisions.
Following the Chancellor’s latest Spending Round in June (his last before the next general election), Matthew Warburton wrote an article called, ‘The new rent formula – what does it mean?’. This is recommended reading for all social landlords.