Rent reduction for housing association tenants 'will mean fewer new homes' » Housing » 24dash.com

Millions of housing association tenants are being asked to forego an expected rent reduction to help avoid a shortfall of new properties.

The National Housing Federation (NHF) has warned that even a small drop in rental income could see thousands fewer new homes being built as services get squeezed.

Rent rises for tenants are linked to inflation measured by September's retail price index (RPI). It is expected to fall to minus 1.7% for July and remain around that level for some time to come.

Ruth Davison, NHF campaign director, said the impact of a 2% reduction would cut the number of homes that could be built next year by 4,000 at a time when nearly five million people were waiting for council homes.

"This is bad economics and bad politics," she told The Times.

"We desperately need new homes. And as the public finances deteriorate we will need more private borrowing to ensure we can continue to build these new homes."

"Taking capacity out is precisely the wrong thing to do. A fair deal would be to freeze rents, giving a real benefit to tenants but still allowing the capacity to build new homes and provide good services."

Housing associations own an estimated 2.4 million homes across the UK. A 2% fall in RPI would see rents fall next year by around £1.40 a week, it is estimated.

Gordon Brown recently announced a £1.5 billion funding boost to supply more affordable homes, as well as proposals allowing councils to build large numbers of new homes.

Ms Davidson added: "The decision to reduce rents at the same time as Gordon Brown has announced a £1.5 billion social housing programme is political ineptitude."

Matthew Gardiner, chief executive of the Trafford Housing Trust (THT), which owns more than 9,000 homes near Manchester, estimated his trust would lose around £1 million in the first year based on a 2% rent drop.

This would mean THT having to "restrict services", he said.

A spokesman for the Department for Communities and Local Government said ministers recognised housing associations' concerns.

He added: "We are consulting on proposals which will protect housing associations from a drop in rental income of more than 2%, striking a balance between the interests of tenants and the taxpayer, whilst supporting the need for continued investment in new affordable housing."