Reference rents

This didn’t get a response when I raised it in another thread, so I’ll raise it in a new one.

The reference rent system of rent control now only applies to board and lodging or housing associations where rents are referred as unreasonable, as well as a few residual cases.  Already rent officers have stopped sending out indicative rents, although there seems to be no legislation that allows them to do this.

However the likelihoold of HA rents being referred under the new system which demands that associations charge 80% of the market rent on re lets and new schemes means that this system is likely to get a lot more use, with 80% rents in expensive areas of low LHA zones being often above the LHA.

Has anybody heard anything about the future of the reference rent system?  With the LHA cuts the reference rent will usually be well above the LHA from April.

Isn’t it the HAs that decide how to decide what ‘Market rents’ are in their areas?

That is correct, but the information from funders makes it pretty clear that they have to have a verifiable approach and that they should not use the LHA or reference rents. This means that some 80% market rates will be above those figures.  So the mechanism that applies if a HB office decides to refer rents is important.  Some HAs and HB offices have a very poor relationship and the increased rents are likely to add to this.

Many councils, probably rightly, do not want HAs to increase rents and will use any clause in nomination agreements and other meanst to limit rents.

Cant see it myself,  the HAs are already worried about their funding streams (other cuts to HB). They aint going to go forward (why would they?) building a whole lot of new homes without taking the HB into serious consideration. (incidentally its up to 80% market rent, not a straight 80%) The Las are desperate for this to work as they need the homes….. The gov t is not going to want this to fail in the first couple of years either. In fact the govt seems to be implying max HB will be paid for the short to medium term…..

The real danger ......is simply that these homes do not get built, as 80% market rents in many areas will just not generate the income to support the level of borrowing that woulsd support the housebuilding neeeded. This will be a particularly bad problem in the North because of market rent levels in that area.

HAs will not go ahead if they cant get the HB to fund this.

This does not mean that there will be real affodability problems for new tenants, in areas where properties do get built, its just not the problem you have identified, I think it will be when the caps hit in 2013….

Just received the Inner Manchester HA allowance rates and compared them to a year ago,

July 2010     June 2011    
Shared   £65   Shared   £60  
1 bed   £103.56   1 bed   £93.46  
2 bed   £126.58   2 bed   £114.23  
3 bed   £143.84   3 bed   £126.92  
4 bed   £184.11   4 bed   £126.92

So it is. This should cause problems in HB claims as stated but interestingly the LA stated they expected a lot of work from these changes and adjusted with this erxpectation in mind but that to date has not appeared