I forgot to do this at budget time. While councils all over the land were trumpeting their council tax freeze again, most were busy sneaking through whopping big rent rises for folk in council houses – again.
Last year’s blogpost on it provides the context and a useful comparison.
But it is probably helpful to restate the formula used – or at least, determined – for setting rent rises. Local authorities use the same rate as that deployed by the UK Government to determine benefit rises. It’s the Consumer Price Index plus 1% in September of the preceding year. Sadly, Westminster appears to have lost this memo somewhere in a drawer, because I’m not aware of any benefit rising by 6.2%. But there are plenty of councils who chose to raise rents by this percentage. Or more in a few cases.
Not all councils have housing these days. Some – namely, Argyll and Bute, Comhairle nan Eilean Siar, Dumfries and Galloway, Glasgow, Inverclyde and Scottish Borders – have all transferred their council housing stock to housing associations. No rent setting information is available for these local authority areas.
One council chose to freeze rent levels. Step forward Falkirk council: the burd salutes your sense of fairness in these tough financial times.
So, to the main event. The table below shows not only the average weekly rent from April 2012, but also the weekly increase and the percentage increase:
|Ave weekly rent||weekly increase||%age|
|Perth & Kinross||57.36||2.84||5.2|
|Weighted Average *||59.61||2.22||3.9|
(table lifted from Highland Council’s budget papers)
Five councils chose to raise rents by 6.2% or more – Angus, Clackmannanshire, Edinburgh, Orkney and Stirling. The capital city has the highest rents in the country, with the average paid by tenants of a whopping £80.78.
The rent-setting strategy has been in place for some time now, but many local authorities have considered – rightly – that the unique circumstances of higher than anticipated inflation and a depressed financial situation mean deviation from the strategy is appropriate. If people would struggle to meet an increase in council tax, how can a rent rise, by significant sums, be justified?
Even if we take CPI +1% of the month in which rent levels were being set for the coming year, that is February 2012, it still amounts to a 4.4% increase. Ten councils chose to set their rent levels at or above this percentage.
Councils are, admittedly, finding it tough to balance the books. They too are subject to rising costs but pay freezes should have helped keep rent levels down this year. Some have considerable reserves – these could have been used to mitigate against some of the increase. The likelihood is that in some areas, this happened. And rental income is really the only source of funding local authorities have for meeting housing costs: if repairs and maintenance, not to mention upgrades are to continue, then rents had to be raised.
But there is no doubt that many families and individuals – who by definition are on low incomes – will struggle to meet even the modest increases passed by councillors. An average £2.22 weekly increase across Scotland doesn’t seem like much but that translates to over one hundred pounds a year additional money tenants have to find, at a time when every penny – never mind pound – is a prisoner.
Previously, officials have justified increases on the basis that most tenants do not have to meet them. In most areas, at least 60% of tenants will be in receipt of housing benefit or local housing allowance as it is now called. But take-up of housing benefit is relatively low – a priority for all councils should be to maximise take-up to ensure that tenants who are entitled to this benefit are not going without and being pushed into financial hardship as a result of having to pay rent that could be being met from Treasury coffers.
However, the UK Government has pushed through significant reforms to housing allowance, including the controversial under-occupancy tax which will punish those who have more bedrooms than the Tories and Liberal Democrats have deemed necessary. Of the budget papers I found online, no mention was made of these changes coming through nor of councils’ need to rethink its rent-setting strategy to accommodate them in future years.
There is much work to be done, because the cash cow that Westminster perceives it was, is about to run dry. These changes have the potential to severely limit the income of councils and the ability of tenants to meet their rents. Raising rent levels by considerable sums this year might not have been the best strategy. Especially for councillors seeking re-election in May.