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Highland Council considers Council house rent levels

Issued: 22 Jan 2007

Highland Councillors are being asked to consider increasing the Council's debt in order to avoid swingeing rent increases for council house tenants.

Following the vote by tenants against housing transfer they were to be faced with rent rises of 7.4%. Now Highland Councillors are being asked to consider using their prudential borrowing powers to fund part of the housing investment programme, in order to keep rent rises to just under 5%.

Councillor Margaret Davidson, Chairman of the Council's Housing and Social Work Committee said "We are very aware that rent rises coupled with rising inflation will cause real difficulties for many of our tenants who are on lower incomes. We wish to take away some of this impact on tenants and we are taking steps to reduce management costs and the cost of delivering our housing services. But that is not enough. We are also seeing a dramatic reduction in the number of tenants who are buying their council houses. This income is usually used to finance our capital investment programme, the money that pays for new heating systems, new kitchens etc. This means we need to look at different ways of financing housing investment."

Members of Highland Council's Housing and Social Work Committee are to consider the level of Council house rent increases and the housing capital programme at their meeting on 24 January 2007

The report to be considered by Members outlines the issues to be considered relating to income and expenditure projections relating to the Council's Housing Revenue and Capital Accounts for 2007/2008.

In recent years council house rent increases have been set at the Retail Price Index (RPI) + 1%, and the Council has funded a Capital Programme of around £14 million annually, largely funded through income generated through sales of council houses under the Right to Buy.

The Council is now faced with the prospect of lower income as a result of a recent, significant drop in council house sales at the same time as its investment requirements have increased, as it currently is required to improve all of its houses to meet the Scottish Housing Quality Standard by 2015. This forces the Council to consider taking on new borrowing to fund investment.

Further work is required to refine the costs and detailed programmes of work required to meet the Scottish Housing Quality Standard and other investment. The Council is required to submit a Standard Delivery Plan to the Scottish Executive setting out how it aims to meet the Standard. This is likely to be submitted in September 2007, providing some flexibility in terms of implementing new investment required, and in the meantime an investment programme similar to recent levels of £12.65 million is recommended for 2007/2008.

The Council is committed to protecting tenants from unaffordable rent increases and will be discussing other options, such as seeking an extension to the time it has to meet the Scottish Housing Quality Standard, with the Scottish Executive in order to minimise the impact of rent rises.

Members will also consider savings on planned expenditure and other budget pressures. The report notes that savings are necessary, including the merger of the Council~s Housing Service and Property and Architectural Service.

The Council will continue to promote the uptake of benefit to ensure that eligible tenants receive help.

Members will consider two options in relation to possible rent increases.

The first option would be a rent increase of RPI +3.5%, which would total 7.4% and result in an average rent rise of £4.09 per week. This level of increase would allow the Council to fund investment in 2007/2008 through a mix of borrowing and the additional rent income generated

The second option would see an increase of RPI + 1%, which would total 4.9% and result in an average rent rise of £2.70 per week. This would involve the Council undertaking additional borrowing of £2.966 million to fund investment in 2007/208, rather than raising extra investment through rent increases.

In his report to Members the Council's Director of Housing concludes that "whilst the position will continue to develop it is clear that increased resources are required for a considerable number of years because of the need to fund the Scottish Housing Quality Standard, the recent substantial reduction in Right to Buy Receipts and other pressures, although every effort will be made to minimise costs. The Council is faced with very unpalatable choices given the consequences for tenants of funding these net pressures."

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