Housing Rents 2012/13 Housing Briefing - 19 January 2012.
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Transcript of Housing Rents 2012/13 Housing Briefing - 19 January 2012.
![Page 1: Housing Rents 2012/13 Housing Briefing - 19 January 2012.](https://reader036.fdocuments.us/reader036/viewer/2022070406/56649e105503460f94afb017/html5/thumbnails/1.jpg)
Housing Rents 2012/13Housing Briefing - 19 January 2012
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Rent Increase 2012/13: Contents
• Background to Rent Restructuring
• Historic links with Housing Subsidy
• Rents under HRA Self-Financing
• HRA Asset Management (Investment) Plan
• Restructured Rent increase 2012/13
• Other rent increase options (examples)
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Rent Restructuring• Government policy with effect from 2002/03• Continuing under coalition government• Based on the Retail Price Index (“RPI”) and moving
council rents towards higher housing association rents (“convergence”)
• Convergence (actual on “formula”) by 2016/17• Uses a “formula rent” based on property and local
affordability factors• Assumed ½% increase annually• Caps & limits on rents & annual increases
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Historic Links with Housing Subsidy• The government decided how much it thought
councils should have spent on housing each year• The government paid “allowances” to councils to
cover management, maintenance, major repairs and charges for capital
• The government takes away “guideline rents” from councils
• This was known as “housing subsidy”; some councils gained (allowances greater than guideline rent) but most including Norwich, were losers (£8m in this financial year)
• “Housing subsidy” abolished under HRA Self-Financing!
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Rents under Self-Financing
• Income from rents retained in Norwich• No allowances for management, maintenance
or major repairs• No subsidy payments to government• Proportion of national housing debt (£151m) to
be allocated to Norwich from April 2012• Norwich will need to borrow to fund the
additional debt
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Rents under Self-Financing
• Subsidy payments replaced by interest & repayment of borrowing – councils will be better off in long term.
• Additional borrowing possible up to “debt cap” (£239m) to finance a higher level of investment than minimum Decent Homes (formerly unsustainable)
• Business Plan shows affordability of interest & repayments – plus impact of investments.
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HRA Asset Management Plan• Recently consulted on - Norwich Standard + Renewables
preferred by tenants.
£0
£10,000
£20,000
£30,000
£40,000
£50,000
£60,000
£70,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Capital Expenditure Need
Capital Finance Available
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Restructured Rent Increase• Based on September RPI of 5.6%• Plus ½% annual increase• Plus convergence by 2016/17• Equates to 8.37% (£5.62) increase on average
Average* Maximum* Minimum*Increase (£) 5.62 8.25 3.24 Increase (%) 8.37% 8.36% 6.10%Rent 2011/12 67.08 88.44 83.71 RPI Increase 5.60% 3.76 4.95 4.69 Real Increase 0.50% 0.34 0.44 0.42 Convergence Adjustment 4 1.52 2.00 0.00- Rent 2012/13 72.69 95.83 88.82
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Other Rent Increase Options
• The council has looked at the effect of a lower increase than government policy requires.
• Modelled options are based on lower rates of RPI:• RPI (5.6%) = 8.37% average increase• RPI-1.5% (4.1%) = 6.85% average increase• RPI-3% (2.6%) = 5.33% average increase
• Not following government policy means less rent income.
• A lower rent income means a lower base for future rent increases, so the effect is magnified over time.
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Other Rent Increase Options
High £8.25
High £6.72
High £5.18
Low £3.24
Low £2.33
Low £1.29
Avg £5.62
Avg £4.60
Avg £3.58
£-
£1.00
£2.00
£3.00
£4.00
£5.00
£6.00
£7.00
£8.00
£9.00
5.6% RPI 4.1% RPI 2.6% RPI
Increase Option
Va
lue
of
We
ek
ly In
cre
as
e
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Other Rent Increase Options Distribution of Rent Increase - Options
-
1,000
2,000
3,000
4,000
5,000
6,000
£1.50 to£1.99
£2.00 to£2.49
£2.50 to£2.99
£3.00 to£3.49
£3.50 to£3.99
£4.00 to£4.49
£4.50 to£4.99
£5.00 to£5.49
£5.50 to£5.99
£6.00 to£6.49
£6.50 to£6.99
Increase
No
of
Ten
ants
Rec
eivi
ng
Incr
ease
5.6% RPI
4.1% RPI
2.6% RPI
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Impact of Ongoing IncreasesLower increases = longer to repay debt & longer to free up resources for investment in council housing
Rent Increase Options 2012/13
-100,000
-50,000
0
50,000
100,000
150,000
200,000
250,000
300,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Year
Deb
t £000s
CLG Debt
5.6% Ongoing
4.1% Ongoing
2.6% Ongoing
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Impact of Reduced Increases• Reduced increase in 2012/13 could be mitigated by
continued convergence on Formula Rent in future years• Losses of income during convergence & future effect on
average rents shown below (though distortion of effect of caps & limits)
RPI 4.1% RPI 2.6%Loss £m 1.826 5.1392012/13 -1.52% -3.05%2013/14 0.53% 0.62%2014/15 0.44% 0.48%2015/16 0.32% 0.35%2016/17 0.22% 1.57%
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The council’s position The council is considering whether it is more
reasonable:• to increase rents by 8.37% in order to deliver
the improved investment in homes and the planned debt repayment schedule, or;
• to increase rents by a lower amount at the expense of a slower investment programme and/or delayed repayment of debt.
It is on this choice that tenants’ views are being invited for the council to take into consideration when making its decision.
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Rent Increase Options 2012/13
Responses to any questions on
Rent Increase Options 2012/13