Council tenants face rent rises of 2,5 times inflation

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HF Forum for Housing Association Tenants calls for an inquiry on overvaluation of properties.

Hammersmith and Fulham Forum for Housing Association Tenants is calling for an urgent “wide-ranging investigation into the valuations reached by housing associations for rent restructuring purposes” by the Housing Corporation, the sector's regulator.

The association has written to the housing minister, Keith Hill, accusing the government of a cover-up over rent rises. The letter said that tenants would have no confidence in the government's controversial rent reform policy unless a full investigation was launched. This comes after the proposal, launched by the Office of the Deputy Prime Minister (ODPM) earlier this year, to change the formula used to bring greater harmonisation in social rents as part of the 10-year restructuring exercise. With the new formula, Council tenants could be forced to pay higher rent.

By 2011 ministers want all social rents to be based on a formula that gives a 70% weighting to regional earnings and 30% weighting on the capital value of the homes. The formula means that the rents on expensive properties will rise each year within an limit. On particularly expensive properties, rents will also continue to rise beyond the 2011 deadline.

The programme has given housing associations an incentive to value their properties as high as possible to maximise their rental income. The same incentive does not exist for councils because any extra rent they receive is clawed back by the government. In July, a three-year progress report on the programme for the government found that, on average, housing associations had valued their properties 13% higher than the government assumed, whereas council valuations were only 3% higher than expected. The report, by the consultants Hacas Chapman Hendy also found that "a small number of associations had property values that were significantly higher than expected". Following it, pressure is growing on the government to mount an inquiry into a group of housing associations that appear to have deliberately overvalued properties in an attempt to raise tenants' rents.

In the letter to Mr Hill, Ron Lawrence, the chairman of the Hammersmith and Fulham forum for housing association tenants says: "Not to order an inquiry would be tantamount to the Office of the Deputy Prime Minister sweeping the matter under the carpet, and would only serve to confirm tenants' impressions that the only interests served by rent restructuring so far have been those of their landlords"

“As we see it, this flawed valuations process has the following implications: it discredits rent restructuring in the eyes of tenants; it means housing association tenants will be paying higher restructured rents than they otherwise would, notwithstanding rent caps; it involves higher restructured rents for council tenants whose rent restructuring formula will be brought into line with that for housing associations if the proposals contained in the consultation paper go ahead; and it vitiates the key rent restructuring principles of harmonisation and convergence. “

The association also points out that social housing tenants’ rents are rising annually by two and a half times the rate of inflation, when average incomes are rising by a little more than the rate of inflation: “These increases are eroding tenants’ living standards. The continuation of annual rent increases beyond 2011/12 well in excess of the rate of inflation is unfair and unacceptable.”

The consultation on the review of the formula to calculate social rents closes on the 30th September 2004and any changes will be implemented from April 2005.

September 5, 2004