Council housing rents to remain some of West Londons lowest

Friday January 13, 2012

Hammersmith and Fulham (H&F) Council’s social housing rents look set to remain some of the lowest within west London, and still significantly below market rates, despite the impact of the biggest shake-up in how the council funds its housing stock for 50 years.
 
The shake-up follows a decision by the Government to radically reform how council housing in England is financed and will see the council become self financing from April this year. Under the present system the Government pays local housing authorities a housing subsidy to cover any shortfall between notional expenditure and income. However, under  the new model there will be no subsidy and the council will retain all of the rents it collects to spend on its housing stock.

As part of this, the council will have to produce a 30 year investment plan, which details how it intends to invest in its housing stock, and more importantly, how it will start to manage its £200+million of housing debt following the reforms. Although as part of the reforms the Government has reduced H&F’s housing debt by £196m, the interest of around £12m per year on the remainder will need to be paid.

The council decided to abolish the Arms Length Management Organisation, H&F Homes last year in order to save money. It now joins all other local authorities in having to balance rent levels with the need to ensure enough money is available to keep the stock in good condition.

In order to do this the council is using a formula used in previous years to calculate rent levels and is recommending a rise of 7.65 per cent for the coming year. This still keeps the levels of rent lower than those in most of inner London and means that the new average rent, inclusive of service charge will be £99.24 for 2012-13. The majority of the most vulnerable residents in the borough will not notice any change to their finances as this increase will be covered by Housing Benefit.

H&F is one of the highest cost housing boroughs in the country and despite the rises the level of council rent is only a fraction of the level of that in the private rented sector. For example, the weekly rent for a council one bed flat is now £88.86 compared to a private rent of £298.05. Similarly, the weekly rent for a three bed house is £122.97 compared to a private rent of £606.09.

The rise in rent also follows news of the completion this month of the £215million Decent Homes project, which started in 2005 to improve the borough's council housing stock, and was paid for by the council borrowing hundreds of millions of pounds. The works have resulted in thousands of kitchens and bathrooms being modernised, electrical upgrades to more than 9,000 homes, new boilers or heating systems installed in more than 8,000 properties and new roof coverings to nearly 5,000, but this money will now have to effectively start being paid back.

Cllr Andrew Johnson, cabinet member for housing, said: “It is clear that 2012 will be a really challenging year for us in housing. For not only are we moving to a new financial set-up which means we have to balance our books in order to keep the stock in good condition, we’ll also have to start servicing  £200+million of housing debt. In real terms it means we’ll be spending some £12million a year in interest payments alone, before we even spend a penny on our stock. With this in mind the decision to raise rents by 7.65 per cent was not taken lightly and even after this rise they will still remain some of the lowest in West London and far below that of the private rented sector.

“Clearly though our tenants and our leaseholders expect us to make sure that rents and service charges are the last thing to rise, which is why we’ll be focusing hard over the coming 12 months to strip out unnecessary costs and waste within the housing department. So far we’ve already identified significant savings for next year and around £4m a year from 2014, but more needs to be done.  A key part of this will be to start paying down the housing debt and reducing the interest bill through managing our stock more effectively. Very few people realise that the council’s housing budget is held entirely separately from our general funds. So while the council has been cutting its historic debt mountain from an eye-watering £176million in 2004 to a projected £94 million by the end of the next financial year, we now need to start the same process in housing. So if it’s a case of rents rocketing or selling an increasing number of expensive empty properties in a poor state of repair to pay the debt, it’s the latter every time. We also have to remember that the Decent Homes funding was never actually real money given to us, only the freedom to borrow, and now that its finished its time to start paying the bill as it forms a part of our debt.

That said we will still be making significant investments in our housing stock over the coming year, including spending over £35million on the capital works programme on things like new lifts, painting and decorating, controlled access and making our stock more energy efficient. Works which have needed to have been done, in many cases, since before the days of the ALMO.”

Despite the huge increases in the cost of gas and electricity nationwide, the council is pleased to announce that it intends to freeze heating charges for 2012/13.

However, in line with the increase in the cost of living, water bills are set to rise by 5.8 per cent. Garage and parking spaces are set to rise by 7.65 per cent.

The council intends to fund its maintenance work without the need for further borrowing by selling off dilapidated properties that are too expensive to bring back into use. Over the next nine years, the council expects to sell 282 of these ‘expensive voids’ to fund maintenance.

The council has also announced plans to cut council tax by 3.75 per cent which is projected to catapult H&F into the top three of low tax borough nationwide if approved at a Budget Council meeting next month.

Average rent per week in inner-London

Rent increases for other boroughs not yet known

Comparative table of average council housing rents and private sector rents in Hammersmith & Fulham

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