Rent Restructuring (Hansard, 26 November 2001)

§ The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton)

Following extensive consultations last year, we announced our plans to make the rents charged by councils and housing associations fairer and to improve tenants' choice in our housing policy statementQuality and Choice: A decent home for all—the way forward for housing last December. Starting in April 2002, we will begin a series of gradual changes that will result in rents being linked to the value and size of a property and manual earnings in the area.

Moving to a fairer system will have real benefits: social rents will remain affordable and generally well below market levels; there will be no large rent increases; we have set a limit of RPI + 0.5 per cent + £2 on the annual increase in any individual rent; and average rents will increase more slowly than in the past; in particular council rents will increase at only half the rate over the last 10 years.

I can today announce a further safeguard. Concerns have been expressed about the effect of the rent restructuring formula on a small proportion of properties in high value areas—around ½ per cent of the total social housing stock. To meet these concerns we have decided that the reforms should not lead to rents exceeding a maximum £100 a week in 2002–03 for any council or housing association home. Lower figures will apply for smaller properties. The maximum will rise by RPI + 1 per cent a year. Some social housing rents are already above these levels and they will be frozen or reduce over time. Average council rents will remain around half the maximum figure.

Housing associations are free to decide how quickly they move their rents to the levels required by rent restructuring although they should aim to complete the process as far as possible in the next 10 years. We have advised the chairman of the Housing Corporation that, where housing associations do not need to put their rents up in order to remain financially sound, they should not be pressed to do so.

I understand that the computer systems used by some local authorities limit their ability to apply different rent changes to different properties next April. I am advising those authorities that for 2002–03 they should apply the average percentage rent change suggested in our restructuring proposals for their stock to all of their rents except where this might involve breaches of the RPI + 0.5 per cent + £2 limit, or the maximum rents announced today. The subsidy system will not penalise authorities for not implementing the reforms at an individual property level.

We will consult further with local authorities and tenant groups about the movement from averaged rent increases to the rents which we expect to be charged for individual properties by the end of the 10-year transitional period.

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Progress on rent restructuring will be kept under constant review. We will monitor the impact closely each year and will conduct further research on this.

The Government have already doubled the resources allocated to local authorities for investment in housing and are committed to increasing them further. In particular, we have committed ourselves to ensuring that all social housing meets the decent homes standard by 2010. This will involve eliminating the £19 billion council housing investment backlog we inherited.

Accordingly, my department is today issuing consultation drafts of the housing revenue account subsidy and Item 8 determinations for 2002–03 which set out proposed subsidy allocations for individual authorities. These are being issued following consultation with authorities and others in which there was general support for the objectives of the proposed changes but concerns were expressed about aspects of the proposals.

In response to these concerns I should like to make it clear that there is no intention that the technical changes designed to bring the assumptions within the subsidy system back into line with actual costs and revenues should be used either to reduce or increase the aggregate level of resources available to councils nationally. Indeed, the starting assumption in the forthcoming spending review will be that these changes should be resource neutral overall.

Some redistribution of resources between authorities is inevitable if we are to move to a fairer system for distributing resources. However, in view of the concerns expressed, we will review the formulae used in determining subsidy with local authorities to ensure that they reflect as accurately as possible the relative costs faced by different authorities. The HRA subsidy system for 2003–04 will be adjusted as necessary to reflect those consultations and the outcome of the spending review.

The proposal to abolish "mitigation"—the mechanism used to ensure that councils with a higher proportion of tenants in receipt of housing benefit are not heavily penalised by the rent rebate subsidy system—will not be implemented at this stage. We will consult further on this and a decision on the future of mitigation will be taken in due course.

All the other changes proposed for 2002–03 will be implemented from 1 April 2002.

Copies of the draft determinations and supporting material are being placed in the Library of the House and will be available on my department's website. These allocations are based on information available to us from authorities as at 29 October 2001 and may change as that information is refined. Authorities have until 17 December to comment on the draft determinations.