RTB? – You kept these DIA consequences quiet Minister?

The consultation paper on RTB issued late December had a draft impact assessment (DIA) attached which revealed when considered that social tenants are set for massive rent increases with 24% for HA tenants and 41% for council tenants by 2015. In context this is against RPI of 13.5% in this time.

The DIA is a turgid document, written in economic jargon and with much technical data and tables as possible. It is no wonder it has received scant, if any, attention and here I hopefully make this readable for anyone. On Page 15 of the DIA we find Table 3 under ‘Macroeconomic assumptions’ – also known as the expected rent increases from now until the end of this Parliament in 2015 and beyond till end of next Parliament in 2010. The inflation figures are in a simple table below.

 

2012

2013

2014

2015

2016 on

RPI

3.3%

2.9%

3.1%

3.6%

3.2%

CPI

2.7%

2.1%

2.0%

2.0%

2.0%

It then goes on to explain the rent increases by tenure – or what the rent increases are expected to be depending on whether you rent from a council, housing association or a private landlord.

Policy

  • Local Authority rent = RPI + 2.5% to 2015 as part of the Local Authority rent convergence criteria,

RPI + 0.5% beyond

  • Local Housing Allowance rent = RPI + 0.5% 2012, beyond, CPI 2013-15
  • Market rent = RPI + 0.5%

Rent increases by your landlord type

 

2012

2013

2014

2015

2016 on

Council   rent increase

5.8%

5.4%

5.6%

6.1%

3.7%

Housing   Association increase

3.8%

3.4%

3.6%

4.1%

3.7%

Private   Landlord increase (LHA)

3.8%

2.1%

2.0%

2.0%

2.0%

Translating this into a table of rent figures I have used the national average HB in-payment figures for the various tenure types and this is below:

HB FIGURES

COST

2012

2013

2014

2015

COUNCIL

£70.95

£77.07

£83.23

£89.89

£99.44

HA

£80.32

£85.37

£90.27

£95.52

£99.44

LHA

£112.01

£116.27

£118.71

£121.08

£123.50

As a glance we can see that the current 2011/12 HB in-payment figure of £70.95 for council tenants will rise to £99.44 by 2015 – a staggering 40.7% increase.

It also reveals that HA rents will increase by 24% from £80.32 to £99.44 by 2015. The rent level for HA and council rents are the same you will note by 2015 and this is because they must converge by 2015 as the Housing Strategy released in November 2011 stated at 46 that:

By 2015, housing association and council social rents will have converged, with landlords able to charge similar rents for similar properties across both sectors.”

Note well the figures above do not include the added costs of the affordable rent programme which will increase average rent levels further. At this time I cant compute how many will come on stream and when. In summary the key message is a 41% rent increase for council tenants and a 24% increase for HA tenants by 2015. The consequences of what this will mean for affordability or benefit dependency or the oft-stated claim of IDS that work will always pay more I will leave as they are obvious.

I turn now to another aspect contained within the draft impact assessment the private rented sector. The DIA says this government expects market rents to increase by 15.75% by 2015 yet expects LHA – HB for private tenants – to only rise by 10.26% in that time. That clearly that isn’t going to happen as private sector landlords will increasingly refuse to accommodate benefit claimants.

In figures LHA now pays £112.01 according to the latest HB statistics against and average market rent of £168.86 and so LHA pays just 66% of the rent with the private tenant making up the difference from other sources and currently this private tenant make up (PTMU) is £56.85 per week. By 2015 the government figures become LHA of £123.50 against a market rent of £195.46 and so the PTMU rises to £71.95 and LHA is just 63% of the rent.

The same DIA has issued figures through to 2020 and LHA falls to 58% of the market rent paying £136.36 against a market rent of £234.40. The trend is that this government expects to be reducing LHA by significantly less than market rents and such a strategy leads to the inevitability of private landlords refusing to accept benefit claimants. PSLs will not idly sit and wait till 2015 or 2020 they will start doing this now.

This means that greater demands will be made upon social landlords to accommodate and yet social landlords are already struggling to meet current and future demand. This strategy shows how inept the assumption of LHA real term reductions are as they won’t happen as this DIA expects. It is incredulous for this government, even with their inept projections to date (HB will fall by £2bn by 2015 for example!) to hold such naive assumptions. If inflation (RPI) increases by more than the assumed figures then the rent figures rise even further and if the gap between RPI and CPI increases the quicker the PSLs will flee renting to benefit claimants.

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