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Executive Group Item No.6 Rent Structures – Starter Paper Purpose 1. To inform the Housing Executive Group about previous research on national rent setting policies, and advise that the Scottish Executive is currently undertaking research and holding policy discussions on rent structures in social housing. Recommendation 2. Members are asked to consider and agree COSLA’s position on rent setting structures within local authorities for forthcoming discussions with the Scottish Executive. Background 3. In England, in 2000, the government issued a Green Paper which included the objective to remove rent differences between Registered Social Landlords (RSLs) and local authorities. The Green Paper was part of a wider longer term package linking the reform of housing benefit, allocations and rent setting. In 2002 the Office of the Deputy Prime Minister introduced rent setting in England. Both local authorities and RSLs now have a common formula for rent setting. 4. Currently, Scottish local authorities have autonomy to set the rents of individual dwellings to raise the total rent income required. ALACHO are clear that tenants do not regard rent levels as an issue. Some tenants are detached from rent levels because of the method of payment of housing benefit. The Welfare Reform Bill proposes to increase the number of tenants handling their own housing benefit and to extend the principle of tenant responsibility. Given tenants may be paid housing benefit directly, they may take more of an interest in rent levels. 5. The retention of local discretion in rent setting keeps housing policy at the heart of the local community. However, national rent setting developments in England and housing benefit reform have led the Scottish Executive to initiate research and discussions on rent restructuring, prior to emarking on potential policy development Evidence base 6. The average local authority rent in Scotland is £46.65 per week in 2006-07, an increase of 4.2% on 2005-06, with a range of £21.12 between the highest and lowest rents. 7. Scottish Executive research, Determined Differences: Rent Structures in Scottish Social Housing (2003), concluded there is scope for greater consistency in rent setting across social housing (or at least a need to establish a clear rationale for existing rental patterns). The research highlighted four areas for further consideration: i. The nature and rationality of rent schemes and rent structures; ii. The policies that determine landlords’ average rents; iii. The process of rent reviews; iv. Potential changes to housing benefit. fd065792-229f-4362-ab20-743615ee1b26.doc 25 8. In 2006 the Scottish Executive commissioned further research, Development Options for Restructuring Social Rents. Part of the research required the modelling of the following policy options: Rents based on house prices; Rents based on earnings, considering options containing either a greater or lesser market value factor; Rents based on earnings. The findings will be available at the beginning of March 2007. 9. Arguments used in support of national rent setting include an ostensible attempt to more fairly reflect the location, type and quality of tenancies and a supposedly improved choice for tenants. However, national rent setting also represents centralisation of yet another element of housing strategy, severely limiting scope for local responsiveness and local accountability. 10. The Scottish Executive is currently running a series of housing policy development seminars asking: How do local authorities determine what level of rent is affordable? Do local authorities make a direct link between levels of rent and the quality of housing provided to individual households? Do local authorities seek to reflect tenant (or prospective tenant) preferences in terms of trading between levels of rent and standard of quality? How might greater efficiencies be achieved? Scottish Federation of Housing Associations 11. Other partners are also less supportive of national rent setting. The Scottish Federation of Housing Associations, for example, consulted RSLs on the affordability and consistency of rents across the housing association sector. Eighteen of the 30 consultation respondents did not support government intervention on rent setting. Sixteen respondents, however, agreed equity across the housing association and local authority sectors was desirable (although the majority thought it was not achievable). The Scottish Executive has also set up a Collaborative Forum on Social Rents with representation from COSLA and ALACHO. Forum members opposed any system to converge rents across local authorities, considering it politically unacceptable. Cosla’s Proposed Position 12. To inform and support COSLA’s proposed position we will look at local and international evidence on rent structuring. The implications of rent re-structuring need to be considered against the broad spectrum of social policy objectives that local authorities deliver. 13. Members are invited to consider and agree the emerging position that: Rent levels are best determined locally within the context of Local Housing Strategies; There is no pressing demand for rents to be set nationally from tenants or providers – the agenda appears to be driven solely by Housing Benefit reform, centralisation and alignment with England rather than by improved service delivery and customer focus. The number of local variables and level of fluctuation in terms of housing quality, market rents, demand, wage levels, and housing pressures, makes national rent setting untenable. Local Authority and RSLs’ long-term business plans, are all agreed on the basis of variable rent levels. The housing priorities identified by tenants and communities and championed by local elected members should drive the national as well as the local policy agenda – rent setting is not a concern. 14. It is proposed that COSLA’s emerging position on rent setting is further developed and conveyed to the range of Scottish Executive-led officer groups as well as to the Communities Minister. Members are invited to agree this approach. Conclusion 15. Social housing rent structures are on the Scottish Executive’s policy agenda. Members are advised to consider the key arguments and agree COSLA’s position. Caroline Johnston Policy Manager 0131 474 9259 email@example.com February 2007 0131 474 9259 firstname.lastname@example.org February 2007
"2007-02-21 rent setting.doc"