Social housing plans to be abandoned

Plans to build thousands of new social homes will have to be abandoned because of the Government’s decision to cut the amount tenants will have to pay in rent next year, The Times has learnt. Housing associations will warn today that their income will fall by at least £260 million next year if the Government continues to link social housing rent to inflation.

The retail prices index is expected to fall below minus 2 per cent in September, the month when rent is set for the next year, presenting the prospect of real cuts in social rental payments for the first time.

In a consultation paper sent out last month the Government said it would set a floor of a 2 per cent reduction in rent and would absorb the deficit if inflation dropped even further. Ministers hoped this would protect both the tenant and housing associations, who have lost millions during the recession due to falling house sales. But the National Housing Federation, which is pressing for a rent freeze, said that although tenants would only benefit by a small rent reduction of £1.36 a week the impact on housing associations could be critical.

Ruth Davison, NHF campaign director, said the formula linking rent payments to inflation was designed for positive inflation. “Rents have never been cut in the history of social housing, even during the Great Depression and two world wars,” she said. “The decision to reduce rents at the same time as Gordon Brown has announced a £1.5 billion social housing programme is political ineptitude.”

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