Slough Council, a Labour administration, is proposing to apply the Tory government’s “affordable rent” policy to new council homes it plans to build. So-called “affordable rent” is up to 80% of market rent. According to the Slough Observer the town’s Cabinet is proposing rent increases along the following lines.

Current council rent

Affordable Rent”

1 Bed

£394.90 pcm

£656.50

2 bed

£474.80

£840.32

3 Bed

£553.80

£1,061.19

4 Bed

£607.45

£1,280.00

Any local authorities that accepted money from the Homes & Communities Agency for new build had to sign an agreement that they would charge “affordable rent” on new properties. The scheme also included “conversions” of existing stock from social rent to affordable rent in order to make up for the low level of government grant. In the case of Swindon’s Conservative administration, for instance, a building programme of 104 homes, partly funded by HCA grant, also involved conversion of 142 social rent homes to “affordable rent”.

However, any council building new homes with their own resources are not obliged to charge “affordable rent”. So why is a Labour council proposing to introduce it? The Cabinet document says that it has had to review its position on charging council rents for these reasons: (read on below or download a PDF here sloughhousingarticle )

  • First, there is now no national government funding for affordable rented homes and the council is therefore dependent on generating its own resources to fund a development programme. While there is funding within the HRA for the existing development programme, these funds are a one-off. Charging a higher level of rent may allow for an extension of the existing programme;

  • Second, the financial analysis…demonstrates that on certain assumptions, the HRA is unstable over the 30 year span of the Business Plan. Furthermore, given that the Government has effectively taken control of the rents charged on existing homes, rents to be charged on new homes are the only significant respect in which the Council can increase its income go the HRA. This income may be required not only for extending the development programme but for funding essential works to existing homes;

  • Third, the introduction of the Government’s “Pay to Stay” policy means that for a significant number of tenants, rents will rise anyway with all of the benefit flowing back to the Treasury rather than being used for the benefit council tenants in Slough.”

None of this justifies adopting the Tory policy of “affordable rent”. The financial pressures that Slough Council’s Housing Revenue Account suffers from are the same for all councils which still own housing stock. Council housing is being starved of funding and the 30 year business plans have been blown out of the water as result of government policy, which is responsible for a significant decline in rental income. Swindon’s Medium Term Financial Plan, for instance, shows that rent income over the remaining years of the original 30 year business plan (from 2012) is expected to be £364 million less than planned for in 2012.

Certain assumptions”

What’s curious about the Business Plan that Slough Cabinet has presented is that the projection for rent increases is lower than those of a Tory Council in Swindon. Slough council’s pompously named “Integrated Sensitive Analysis” makes the most bizarre projections based on “certain assumptions”. They say that after the four years of a 1% rent cut, “for the next 6 years there is no rent increase”, then a gradual increase of 0.6% for the next 10 years, then 0.9% for the 10 years after that. This would take around £57 million out of the HRA. Frankly this has all the indications of exaggerating the problems in order to bolster the case for charging AR rents. On what basis do they assume 6 years of no rent increase when nobody yet knows what the government will announce for the years after the rent cut?

In Conservative run Swindon the assumption incorporated into the Medium Term Financial Plan is that there will be a return to CPI + 1% rent formula after the 4 years of rent cut. Whether or not this is what will happen remains to be seen, but the assumptions of Slough’s Business Plan are absurd.

Options Appraisal

Slough Cabinet is also proposing to carry out an ‘options appraisal’. The term should give cause for concern. The document does not mention the possibility of the council proposing to sell the stock to a housing association, or to set itself up as a new housing association. However, you have to wonder whether this is what they have in mind. Under New Labour the options appraisal was a means of pressuring councils to transfer their council housing stock to housing associations1. The projections of Slough’s 30 year Business Plan suggest that this might be in the minds of the Cabinet members and/or the council officers who could look forward to significantly inflated salaries if Slough transferred its stock to a housing association.

Labour opposition

Thankfully there is opposition in the local Labour Party to the Cabinet’s proposal. The Slough Observer quoted two Labour councillors (not Cabinet members) who spoke at the Cabinet meeting. Rob Anderson said that

For someone who has a two bed house and has been on the waiting list for 10 years for a three bed home, their rent will rise from £474.80 a month to £1,061.19. Nobody on a low income is going to be able to afford that.”

Councillor James Swindlehurst said:

Historically this council has made a commitment to maintaining council housing stock, but that is now only described as an ambition. This cabinet needs to think very seriously about its consultation and review of these properties. Social tenants depend on low rent housing and we have decided to do the Conservative government’s dirty work for them.”

That just about sums it up.

Instead of implementing Tory policies Slough council’s Labour group should be pressing Labour nationally to do what Swindon Tenants Campaign Group is calling for:

  • The reopening of the ‘debt settlement’ of 2012, and the reduction of debt in line with the difference between the 2012 estimates of rent income, and the much lower income which is being taken in as a result of government policies since then;

  • Labour to make a commitment to write off/ cancel the bogus council housing debt. The debt which Slough and other councils were given in 2012 was based on an estimate of rent income which is out-of-sync with what is actually being taken in. The ‘debt’ itself was the result of creative accountancy by the Treasury.

STCG’s recent pamphlet “The case for cancelling council housing debt” explains why these demands are essential if the housing crisis is to be tackled.

Starving council housing of funds

Council housing is being systematically under-funded by coalition and Tory government policies, including a four year 1% rent cut. The rent cut alone will mean a 12% cut in planned income2. The ‘enhanced right to buy’, introduced by the coalition government, with increased discounts, has tripled the number of sales. Every sale erodes the rent income that councils take in. The government’s Housing Act threatens to force councils to sell off ‘high value’ homes to compensate housing associations for the difference between the discounted price and the market value. The less income the less resources councils have to maintain and renew their existing stock, never mind build new homes.

These policies which are starving council housing of funds need challenging. Slough council should be challenging what the government is doing and pressing Labour nationally to campaign against this under-funding of council housing rather than as Councillor Swindlehurst said “doing the Conservative government’s dirty work for them”. Building new homes with unaffordable rent will only make the housing crisis worse. Their proposal should be abandoned. If pushed through it would be used by the government to show that even Labour councils are supporting their policies.

Martin Wicks

November 21st 2016

1Council debt was written off if tenants voted ‘the right way; i.e. in favour of transfer.

2Planned income was based on rent increases of CPI + 1%.

Advertisements