The Office of the Deputy Prime Minister is considering changing housing revenue account subsidy calculations to take into account losses incurred under rent restructuring. Under this regime, increases are capped at the retail price index, or rate of inflation, plus 0.5%, plus £2 a week. This runs alongside caps that councils are not allowed to breach.
One senior civil servant explained: "If there's a rent cap of £100 on a property and the authority wants to put its rent up from £98 a week to £102, it gets capped at £100, leaving the council £2 a week out of pocket. The subsidy system doesn't take account of that, so we will adjust it to provide that extra £2."
The money will come from existing budgets, but will be redistributed to take account of winners and losers under restructuring. This could mean councils in high-value areas like London netting more of the subsidy, the official admitted.
The changes to service charges will see them capped at the rate of inflation plus 0.5% plus £2 a week. The ODPM will this week release guidance for councils on how to separate service charges from rents, in the way that most housing associations already do. The total rent and service charge increase will have to remain within the retail price index formula to protect tenants from service charges rising above rent levels.
Councils will be given discretion over which approach would suit their situation best but will be subject to reviews in around three years.
Chartered Institute of Housing policy officer Sam Lister said he expected the devil of these changes to be in the detail.
He feared that, if the subsidy was redistributed to reflect losses to rental income based on averages rather than individual landlords, cash would be "spread too thinly".
He said: "The crucial test will be how it affects individual landlords. This is critical for local authority landlords because, traditionally, councils pooled a lot more service charges."
Source
Housing Today
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