Regulator moves in on troubled association whose business plan needed RPI+2
One of the first casualties of the government's policy to cap social housing rent increases to inflation only emerged this week as regulators descended on a housing association.

The Housing Corporation has made two statutory appointments to the board of Hastings-based 1066 housing association amid regulators' concerns over its long term financial viability.

An investigation revealed that the association, which was formed following the transfer of Hastings council's 4,500 homes four years ago, was unlikely to be able to peg rent increases to inflation only in the future.

Its original business plan was based upon a rental income rising each year by two percent above the retail price index, or RPI+2.

The association was already experiencing "difficulty" meeting subsequent corporation policies to hold rent increases to RPI+1, although this rent guarantee had just been extended until 2003/04.

It was doubts about the the association's ability to meet inflation-only rises after 2003/04 which prompted the corporation to appoint Peabody Trust chief executive Richard McCarthy and St Pancras housing association chief executive Adrian Norridge to the 1066 board.

The association is also experiencing low demand problems on three estates in the Ore Valley area, where a quarter of its stock is based.

The corporation's action follows repeated warnings by the sector that setting rent increases to inflation only will force associations into bankruptcy - a reaction which housing minister Nick Raynsford likened to "a rabbit fixated in headlights" (Housing Today, 22 June).

1066's acting chief executive Steve Foreman admitted: "We are going to be very adversely affected by the proposals on rent setting in the Green Paper." However, he insisted that the association was "OK to meet the commitment to funders and OK in the short to medium term."

Chair George Adams pledged to work closely with the regulators to resolve the situation. "We recognise the seriousness of the situation and welcome the additional experience and expertise that the statutory appointments will bring."

The corporation confirmed that it had placed 1066 under supervision "primarily because of serious concerns about its ability to produce a viable business plan."

Source

Housing Today