HOUSING FINANCE BILL: RENT INCREASE PROPOSALS (Hansard, 10 July 1972)

§ THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN)

The Department of the Environment wrote on July 5 to the following three authorities giving them an informal indication about the likelihood of a direction under Clause 62(4) being given on the coming into force of the Bill:

Birmingham C.B.C.,

Newcastle upon Tyne C.B.C.,

Hammersmith L.B.

The texts of the Department's informal letters are as follows:

LETTER TO THE DIRECTOR OF HOUSING. BIRMINGHAM

Thank you for your further letter of 21st June and the information it contained. I was also grateful that you and Mr. Davis were able to come on 29th June to give us further particulars. As a result I am now able to give you the indication, requested in your letter of 3rd May, as to whether on the coming into force of the Bill a direction is likely to be issued under what is now clause 62(4) of the Housing Finance Bill in respect of the increase towards fair rents in October 1972 which your Council would be required to make under Part VI of the Bill. (All references in this letter to a weekly rent are based on a 52 week rent year.) In your letter and during our talk you explained that, of the factors you have taken into account in estimating fair rents for your Council's dwellings, you attached only a marginal significance to any differences in security of tenure between private and council tenants and in the procedures for determining fair rents, and to the level of earnings of manual workers in the area. You made it clear that the last factor was used only to determine a ceiling for average fair rents. I note that on the specific basis on which you have used this factor (and there is obviously doubt as to whether this specific basis is the most appropriate), the application of this factor would lead to the general conclusion that the average fair rent of council dwellings in Birmingham at the beginning of 1972 should not have exceeded about £4 a week. i.e. £1 a week above the current average unrebated rent charged by your council. Thus the criteria which you have principally taken into account are the return on the capital value of your dwellings in the light of recent sales of your older council houses, the 1973 Gross Values for your council houses, the statistical evidence of registered rents throughout the country as ratios of 1963 Gross Values, and a comparison with the rents of certain private dwellings which you felt to be comparable which have recently been registered in Birmingham. Your application of these criteria led you to estimate the fair rent for 101WA the most typical dwellings in the largest class of pre-war dwellings at 1.75 times the 1963 Gross Value, for the most typical dwellings in the two largest classes of early post-war dwellings at 1.85 and 2.00 times the 1963 Gross Value, and for the most typical dwellings in the two largest classes of late post-war dwellings at 2.00 and 2.25 times the 1963 Gross Value. Of these criteria we are bound to attach particular importance to the comparability with private registered rents in the Birmingham area, as the Courts (e.g. in the case of Tormes v. Landau) have regarded this criterion as the best and most appropriate. On the basis of that criterion it seems to us that the fair rents of your council's dwellings are likely to reflect ratios of 1963 Gross Value which are somewhat higher than you have thought likely. You took into account the registered rents of 20 private dwellings which you felt to be comparable with a typical unmodernised pre-war 3 bedroom non-parlour house owned by the council. You explained that the dwellings in question are considerably larger than such a typical council house and differ from it in their amenities, but that the rents registered for these dwellings showed an average ratio of rent to 1963 Gross Values of 1.80. It seems to us that greater significance attaches to the fact that of the 1,200 or so fair rents registered for houses in the Birmingham registration area in 1971, about 300 registrations for houses previously subject to rent regulation showed an average rent: 1963 GV ratio of 2.05, about 200 registrations of houses previously subject to rent control but improved to the required standard showed an average rent : 1963 GV ratio of 2.22, and about 700 registrations of houses previously subject to rent control but already up to the required standard showed an average rent: 1963 GV ratio of 2.26. Nevertheless it appears to us that, if no direction were given under clause 62(4), it is likely that the increase towards fair rents of £1 a week per qualifying dwelling which your council would be required to make in the year 1972–73 would result in the rents of more than 2 per cent. of your council's qualifying dwellings being substantially above the fair rents for those dwellings and that the amount of that increase towards fair rents (which is of course an average amount) should be less than £1 per week, so as to enable your council to distribute or apportion the increase within the maximum of £1 per week for any individual dwelling in such a way as to avoid the likelihood of such a result. Accordingly, the Secretary of State would be willing, when the Bill is in force, to give a direction under clause 62(4) that your council's increase towards fair rents in the year 1972–73 should be 65p per week. That direction will not affect the fair rents to be determined for your council's HRA dwellings. The determination of fair rents is not a matter for the Secretary of State but is the responsibility of the housing authority and the rent scrutiny board in accordance with Part V of the Bill. Nor will the direction relate to the amount of any increase towards fair rents for the Council's qualifying dwellings in 1973–74 or subsequent years.

102WA

Letter to the Principal City Officer, Newcastle: Thank you for your letter of 12 June together with supplementary information in support of your request for an indication of whether a direction is likely to be issued in due course under what is now Clause 62(4) of the Housing Finance Bill in respect of the increase towards fair rents in October 1972 which your council would be required to make under Part VI of the Bill. It is noted that your Council have made a preliminary assessment, of the fair rent of all council dwellings in the light of the age, type, general condition, character, location and size of the dwellings and that in addition the Council compared their assessments with estimates made by the Rent Officer. While we would not necessarily agree with all the estimates made in your letter, it does appear to us, having considered the information provided by your Council, that, if no direction were given under Clause 62(4), it is likely that the increase towards fair rents of £1 per week for each qualifying dwelling which your Council would be required to make in the year 1972–73 would result in the rents of more than 2 per cent. of those dwellings being substantially above the fair rents for those dwellings. To avoid the likelihood of this result it would appear that the amount of that increase towards fair rents (which is an average amount) should be less than £1 per week, so as to enable your Council to distribute or apportion the increase as may be necessary within the maximum of £1 per week for any individual dwelling permitted under the Bill. Accordingly, the Secretary of State would be willing, when the Bill is in force, to give a direction under Clause 62(4) that your Council's increase towards fair rents in the year 1972–73 should be 35p per week. That direction will not affect the fair rents to be determined for your Council's Housing Revenue Account dwellings. The determination of fair rents is not a matter for the Secretary of State but is the responsibility of the housing authority and the rent scrutiny board in accordance with Part V of the Bill. Nor will the direction relate to the amount of any increase towards fair rents for the Council's qualifying dwellings in 1973–74, or subsequent years.

Letter to the Borough Treasurer, Hammersmith: Thank you for your letter of 19 June asking whether an indication could be given that a direction is likely to be issued in due course under what is now Clause 62(4) of the Housing Finance Bill in respect of the increase towards fair rents in October 1972 which your authority would be required to make under Part VI of the Bill. We understand from a telephone conversation with you that the Council's own Valuation Department assessed the fair rents and took into account the registered rents of comparable private properties in the area. In addition, estimates of the likely fair rent for certain sample dwellings were obtained by the Council from the Rent Officer. 103WA While we would not necessarily agree with all the estimates in your letter, it does appear to us, having considered the information provided by the Council that, if no direction were given under Clause 62(4), it is likely that the increase towards fair rents of £1 per week for each qualifying dwelling which your Council would be required to make in the year 1972–73 would result in the rents of more than 2 per cent. of those dwellings being substantially above their fair rents. Thus it seems that, to avoid the likelihood of such a result, the amount of that increase towards fair rents (which is an average amount) should be less than £1 per week, so as to enable your Council to distribute or apportion the increase as may be necessary within the maximum of £1 per week for any individual dwelling permitted by the Bill. 104WA Accordingly, I am writing to inform you that the Secretary of State would be willing, when the Bill is in force, to give a direction under Clause 62(4) that your Council's increase towards fair rents in the year 1972–73 should be 75p per week. That direction will not affect the fair rents to be determined for your Council's Housing Revenue Account dwellings. The determination of fair rents is not a matter for the Secretary of State but is the responsibility of the housing authority and the rent scrutiny board in accordance with Part V of the Bill. Nor will the direction relate to the amount of any increase towards fair rents for the Council's qualifying dwellings in 1973–74, or subsequent years.

House adjourned at twenty-five minutes before nine o'clock.