Handling of the HRA subsidy determination and consultation NFA

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					Handling of the HRA subsidy determination 2009-10 and 2010-11 consultation
                              NFA Response

The National Federation of ALMOs (NFA) represents all 69 arms length
management organisations (ALMOs) who between them manage more than one
million council homes across sixty-six local authorities, more than half of all council
housing in England.

The NFA welcomes the opportunity to comment on the consultation proposals for
the HRA subsidy determination for 2009/10 and 2010/11.

The NFA welcomes the objectives behind the proposals in this consultation paper
and is pleased that the Government has recognised the difficulties that the current
uncertainty and volatility in the HRA subsidy system causes to Local Authorities and
ALMOs when trying to plan budgets and deliver services.

As a national membership organisation it is difficult for the NFA to comment directly
on matters relating to the distribution of HRA subsidy between its members and
therefore we have kept our comments to areas where there is consensus and raised
some further questions and issues relating to ideas put forward in the consultation

 Guideline Rents
Our members are in very different positions in their “rent restructuring journeys” and
either of the proposals in the consultation paper is likely to affect our members in
different ways. For some, the return to a convergence date of 2011/12 for 2009/10
onwards following the use of a target convergence date of 2016/17 for 2008/09 is
bound to result in higher than expected rates of increase in actual rent charge. For
others past limits on the levels of increases in actual rents will mean that they will
not now achieve convergence by 2011/12 anyway.

There is insufficient detail on how either of these proposals are likely to affect our
members in the consultation paper and the NFA would therefore request that further
information is disseminated to stakeholders on the detail of how these options would
work in practice. We would then appreciate an opportunity for the NFA to further
discuss these options with CLG officials before fully supporting one or other of these

However, we can say at this time, that in general our members, given the significant
uncertainty prevailing around the subsidy system, are interested in exploring the use
of fixed inflation rates for the two-year period 2009/10 and 2010/11 as this should
them more time for modelling the implications of the outcome of the HRA
determination and therefore be better able to adapt and plan within the given
However, if the inflation rate for guideline rents is to be fixed the question then
follows what will happen on the allowance side of the equation?

It would also seem an appropriate time to be reviewing the decision to use the GDP
deflator for Allowances but the RPI for guideline rent increases given that the
divergence of the two indices has led to much higher increases in tenant’s rents
than the fairly modest increases in the allowances over the past few years.

Higher end limits
The NFA broadly supports the use of further higher end limits as long as there is full
compensation through the subsidy system for that limitation.

The NFA believes that tenants in those areas threatened by steep rent increases
should be protected from excessive increases in rent levels, especially in the current
economic climate but that landlords and tenants should not be financially penalised
through the HRA subsidy system by that limitation.

Our concern is that ALMOs and Local Authorities that have started de-pooling
service charges would lose all of the income gained from de-pooling if the Rental
Constraint Allowance were applied in the same way as previously. We would
therefore ask CLG to find a method of limitation and compensation that would not
disadvantage those authorities and ALMOs that have followed a government policy
in de-pooling service charges.

One of our members has suggested an alternative way to limit the rent increases, by
leaving convergence at 2016/17 for guideline rents and thus encouraging LAs to
keep rent increases low in that way. Many ALMOs and Local Authorities moved their
convergence date to 2016/17 when setting rents for 2008/09 and this could easily
be maintained in 2009/10 when high RPI will inevitably lead to higher rent increases.
If the government is minded to put a upper limit on rent increases for the next two
years, the NFA would like to explore options for doing so that are fair to all ALMOs
and tenants.

HRA Allowances

The NFA supports the proposals with regard to allowances as a temporary measure
and welcomes the fact that they should bring a little more certainty and stability into
the system whilst we are awaiting the outcome of the wider Review of Council
Housing Finance.


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