News and Events
Proposed Rent Increase 2010/2011
22 January 2010
ClochThe Association is in the process of finalising proposals for the rent levels to be charged in 2010/2011 (from 1 April 2010).
The Association has a legal duty to consult and involve tenants in how these proposals are reached.
The Association held a Consultation Process in November 2009 and a further Consultation Day on 20 January 2010. Unfortunately there was a very poor response to the consultations.
Cloch Housing Association is now proposing a rent and service charge increases of 3.4% for 2010/2011.
Ex Scottish Homes Properties are restricted to a rent increase of RPI + 1 which will be 3.4%.
Maukinhill unimproved properties are restricted to a rent increase of RPI which will be 2.4%.
The Retail Price Index (RPI) is currently (at December 2009) running at 2.4%. It is expected to rise to around 4.0% over the next few months; but fall to around 3.0% over the coming year.
The Association is also considering applying the same 3.4% increase to Heating and Service Charges for 2010/2011. However, we understand that the utility companies are about to announce yet more increases in the cost of gas and electricity. This may have an impact on the review process.
Residents who pay a heating service charge will be separately consulted over the next month.
The Association is again having to increase rents above inflation to protect Service Levels and to cover future costs. Even with this increase the Association will have to operate within a very tight budget framework for 2010/2011.
Background to Rent Increase Proposals
The main reasons for seeking above inflation increases over the last few years relate to four key issues:
Firstly Housing related inflation has been running at a very high level over the last few years. Building, Maintenance, and Loan Costs have been running at well above inflation; nearly double over the last few years. Even in the recession housing related costs are one of the main reasons for the recent jump in the inflation rate.
Secondly changes to the way the Government funds new developments has had a major impact on development costs; with Associations being asked to fund a greater share of development costs. This is a current major issue that is directly affected the future ability of the Association to meet its current development commitments.
Thirdly the Government has introduced new long term maintenance standards for all our houses that include future costs that most landlords have not budgeted for. We have now had to look at increasing our future budget requirements to meet these new standards (Scottish Housing Quality Standards).
Fourthly staff costs have increased, mainly due to the major changes nationally in how future Pension requirements are to be financed.
Maintaining Service Levels in the new Financial Climate
The Association (like all other Housing Associations in Scotland) is looking at how we can maintain our existing commitments to provide, build, and maintain our houses.
This includes looking at how we maintain the level of service we provide to our tenants. We will be looking at efficiency savings, reducing costs, and joint working with other Associations.
However, we are very conscious of what makes Cloch such a good landlord; and are very wary of watering down that service. This is particularly an issue given the level of intense housing management needed in our areas of operation throughout the east end of Greenock.
The international financial crisis and recession is having an impact on the work of the Association. Inflation rising over the last few months, and likely to continue rising over the next few months, has been a surprising result. It is hard for us to judge what impact the recession and high inflation will have on the four key issues above; and therefore whether we can reflect this in the forthcoming rent increase proposals.
Development Funding Changes:
The government has continued to reduce the amount of grant available to build new homes. This has meant that the Association must increase the amount of Private Finance required to build the houses. An increase in Private Finance loans has serious implications for both future affordable rent levels and the amount available for the future maintenance of the homes.
The housing association movement has been arguing against these changes to little or no avail. Even lenders have expressed concern about the new assumptions; and refused to fund some developments (elsewhere in Scotland) on this basis. We are hoping this will change things; particularly in the current climate. However, we are obliged to operate within the current financial parameters set out by the government; and our rent increase proposals must reflect this.
In summary, the Association's Rent Setting Policy should:
· be applicable to all the housing stock owned by the Association
· take account of the range of differing factors throughout the stock
· be flexible
· be easily understood and operated
· allow the Association to continue to house its traditional client groups including the unemployed, low-paid, the elderly and all others with identified housing needs.
· take account of the following areas of expenditure :
o mortgage payments
o management costs
o maintenance costs
o major repairs
o voids and bad debts
o contingencies/risk management
· provide sufficient income to enable the Association to continue providing its tenants with a high degree of management services
· provide rent levels that are comparable with similar local housing providers.
If you want to discuss any of the above further contact your designated Housing Officer in the first instance.
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