A £451,000 hole has been blown in Redditch council’s Housing Revenue Account for 2016/17 following a Government U-turn on rent increases.
And the hole is projected to widen rapidly following the Government’s decision to reduce social rents by one per cent per year for the next four years when previously it has proposed rent rises in the social sector of the Consumer Price Index plus one per cent for ten years.
Taken over the 30 year term of the loan the authority took out to buy its housing stock, the loss of rental income is estimated to hit £120 million.
It’s a figure which is almost the same as the borough’s £122m council property mortgage and means it won’t be able to repay its loan as scheduled.
“It’s going to be really, really difficult for us,” said council leader Bill Hartnett (Lab, Church Hill).
“The Government have done it to protect their welfare budget. The majority of council tenants in the country are in receipt of benefits, including housing benefit so a one per cent cut saves the Government a lot of money.”
However a saving for central government has resulted in a major headache for local authorities and housing associations which have been left with a dwindling income.
And while the impact on the borough will be huge, the benefit of the cut on tenants is likely to be barely noticeable with average rents falling by just 81p a week.
“This is going to have a major impact on our income projections and will affect the services we can offer our tenants because we will have less money to do repairs and modifications and all the things they want,” said Coun Hartnett.
He added that to combat the shortfall he was asking for more money to be transferred to fund new housing stock and once again running the council’s successful mortgage rescue and house buy back programmes.
