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Shortfalls in housing funding will force councils to increase rents by well over five times the inflation rate, loc...
Shortfalls in housing funding will force councils to increase rents by well over five times the inflation rate, local authority associations fear.

Last week the government announced it was consulting councils on an increase in guideline rents of £2.20 a week, about 7.5% - compared with an inflation rate of 1.4%. This will take the national guideline rent to £31.60.

The DoE says actual increases should be between £1.50 and £2.90. Guideline rents dictate how much housing revenue account subsidy councils get.

The subsidy makes up any shortfall between the government's assumptions about income, mainly from rent, and spending on management and maintenance, rent rebates and loan charges. The government plans to increase the management and maintenance allowance by 4% to £3.4 billion.

The allowance is the mechanism by which the DoE distributes support for the costs of running council housing.

The increase will be distributed between 183 councils whose allowances are below the government's estimate of what they need to spend. Funding for the rest is frozen at this year's levels.

Paul Lautman, assistant secretary of housing at the Association of District Councils, was concerned that the rent increase followed the pattern of previous years of outstripping pay rises. Real rent increases would exceed the guidelines because of the shortfall in management and maintenance funding, he said.

'The government's target level of funding bears no relation to what councils are actually spending, and council tenants have to carry the extra burden. It is the second year running that many local authorities have not had any cash increases in their maintenance allowance'.

The Association of Metro-politan Authorities claimed the announcement meant rents would rise by up to 11% and increase the housing benefit bill by £500 million.

'Tenants who are not on benefit will be asked to dig deeper into their pockets to subsidise those who are', said Margaret Moran, AMA Housing chair. 'The rest of the bill will have to come from the public purse'.

Pete Challis, chair of the Association of London Authorities, said rents in Ealing LBC would reach £260 a month while Westminster City Council tenants would face bills of £250 a month.

'The government introduced a system in 1990 which linked rent increases to property prices. Despite London house prices falling dramatically, council rents have risen by 65%. It's time the government brought fairness to its system of housing finance'.

The rent increases would hit tenants at the same time VAT was imposed on fuel, he said.

Housing Minister Sir George Young said the proposals were a good outcome for tenants in a difficult public expenditure round.

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