TENANTS of Rugby Borough Council are almost certain to see their rent increase over the next five years, the council’s cabinet has been told.
The increase is needed to pay off a one-off fee of an estimated £72.917m in return for freedom from Government control, while meeting the Government’s requirement for private and public sector ‘rent convergence’ within 5 years.
The cabinet were presented with a draft medium term financial strategy for the council’s housing stock that presented three potential options for future rents:
*A rent convergence model with rent increases of up to 7.54% per year for 5 years, which would see council rents converge, or catch up, with private rents.
*A ‘smoothed rent convergence’ model with average rent increases of 5.65% for 5 years, which would have the same result but with no rent ‘spike’ for tenants.
*Capped annual rent increases of 3.5% for 5 years, which would not result in rent convergence within 5 years. There would be estimated additional borrowing costs of £12.775m and reduction in the home improvements programme. There would also be less finance available for investment in new affordable homes.
While there are still many uncertainties, the Cabinet heard that the government would provide more detailed information about the funding proposals in November and January.
Cllr Leigh Hunt, Rugby Borough Council portfolio holder for sustainable inclusive communities, said: “Nobody will want to see their rent increase, especially in these difficult economic times, and I certainly don’t want to be the bearer of bad news. However it is vital that we set rents at a level that will reduce our debt costs and allow us to invest in our housing stock and ensure that we will meet the changing needs of residents now and into the future
“The final rents for next year will not be set until the full Council meets in February, when the final figures will be available, but given the estimates that we saw this week I would advise tenants to prepare for further rent increases.”
Tenants who are experiencing difficulty paying their rent can make an appointment with a benefits advisor to assess eligibility for Housing Benefit by calling (01788) 533433.