The measures will be introduced in the New Year. They will help private tenants and secure tenants of registered social landlords, including many elderly people and people on fixed incomes.
In a Written Answer to Margaret Moran, (Luton South), Ms Armstrong said:
'Tenants have been facing exceptionally high fair rent increases, following recent court cases. We received more than 500 responses to the consultation paper we issued in the summer which proposed limiting fair rent increases by applying a formula linked to the Retail Price Index (RPI). There was overwhelming support for this from individual tenants and tenants' organisations. They considered our proposed limits were too high, however, and we have responded to this.
'Rent officers and rent assessment committees will continue to determine fair rents as they do now. Where applications for re-registration are made to the rent officer after the Order comes into effect, however, fair rent increases will be limited to RPI + 7.5% for the first re-registration (rather than RPI + 10% as originally proposed) and RPI + 5% for subsequent re-registrations.
'This will ease the anxiety faced now by thousands of tenants, many of whom are elderly or on fixed incomes. It will give them certainty that their rents cannot be increased by more than these limits.
'If there is no existing fair rent registration for the property, these limits will not apply. Nor will they apply if the rent officer or rent assessment committee considers that repairs or improvements carried out by the landlord have changed the condition of the property or common parts so much that the new rent should be at least 15% more than the existing registered rent. I believe that, in these limited circumstances only, it is fair for landlords to charge the full fair rent increase.
'The new limits will apply to private tenants and secure tenants of registered social landlords who have a fair rent registered under the Rent (Agriculture) Act 1976 or the Rent Act 1977. They will not apply to rent increases for assured or assured shorthold tenancies under the Housing Act 1988. We have no plans to change the legislative framework for these tenancies.
'The Order will be laid immediately after the Parliamentary Recess and will come into force shortly afterwards. My Department will make a further announcement when the Order is laid. We will issue a leaflet for landlords and tenants explaining in detail when the limits apply and how rent officers and rent assessment committees will calculate them, and details will appear on our internet site.'
1. In 1996/97 there were some 242,000 regulated private tenants (10% of all private tenancies), of which 128,000 had a rent registered by a rent officer. There were some 287,000 secure tenancies of Registered Social Landlords (just under 30% of all RSL tenancies) for which the rent officer registers the maximum rent that can be charged. Over 60% of regulated private tenants with registered rents are retired and only 30% are working; 35% of RSL tenants are retired and only 30% are working.
2. Most private tenancies entered into before 15 January 1989 are regulated tenancies under the Rent Act 1977. Regulated tenants have long-term security of tenure and both landlord and tenant have the right to have a fair rent registered for the tenancy by an independent rent officer. Both also have the right to appeal to a rent assessment committee if they are dissatisfied with the rent officer's decision. Once a rent is registered, the landlord cannot normally charge a higher rent without reapplying to the rent officer. Further applications are not possible for two years unless there is a relevant change of circumstances.
3. In assessing fair rents, rent officers and rent assessment committees must follow the rules set out in section 70 of the Rent Act 1977. This requires them to take into account the age, character, locality and state of repair of the dwelling, but to disregard any premium resulting from a scarcity of similar accommodation in the area. A fair rent is therefore what a landlord could achieve in a market in which the supply of, and demand for, accommodation are in balance.
4. In the past, rent officers and rent assessment committees tended to assess fair rents by comparison with their own previous decisions. However, since the Housing Act 1988 introduced assured and assured shorthold tenancies at open market rents, a growing volume of market rents has become available and it has been possible to determine fair rents by starting from the market rent and subtracting any element due to scarcity. Two recent Court of Appeal cases (Greater Manchester and Lancashire Rent Assessment Panel v Spath Holme in 1995 and London Rent Assessment Panel v Curtis in 1997) have given more weight to the latter method. As a consequence, fair rents have risen steeply.
5. The principles and procedures for registering rents for private regulated tenancies apply broadly to secure tenants of RSLs whose tenancies were entered into before 15 January 1989. Rent officers register the maximum rent which may be charged for a secure tenancy and the RSL must go back to the rent officer if it wishes to increase the rent above this level. The factors which have led to sharp rises in the rents of private regulated tenancies have also resulted in steep increases in RSL fair rents.
6. Since April 1997, under new performance standards issued by the Housing Corporation, RSLs are expected to limit rent increases for
existing secure and assured tenants to RPI + 1%. However, this figure applies to the total rent envelope of an association's stock rather than to individual rents. It does not prevent an individual's rent from rising by more than this.
7. The consultation paper Limiting Fair Rent Increases, issued in May 1998, proposed that a maximum limit should be applied to the rent increase that can be registered by a rent officer, linked to the increase in the Retail Price Index (RPI) as a measure of affordability. The consultation paper proposed a limit of RPI + 10% for the first re-registration and RPI + 5% for subsequent re-registrations. Two exemptions from the limit were proposed: it would not apply to first registrations or cases where the rent officer or rent assessment committee considered that a substantial increase in rent was due as a direct result of repairs or improvements by the landlord to the property.
8. Over 500 responses were received to the consultation paper. Copies of the non-confidential responses have been placed in the Department's library, to which the public may have access.