South Kilburn residents face barely affordable rents hike - (if our sums are right)

South Kilburn resident Pete Firmin has been giving himself a headache trying to work out what Brent Council's 'affordable rent' policy really means. In this Guest Blog, after studying Council documents, he give it his best shot. We would be happy to hear from anyone who can show the conclusion is wrong (with workings!).

“2.1. That the Cabinet agree to set rent levels for the affordable homes at Gloucester House and Durham Court once complete, at a rent equivalent to the Homes and Communities Agency Target Rent levels.”

“3.1 The redevelopment of Gloucester House and Durham Court site involves: a. the demolition of Gloucester and Durham and the development of 236 new homes for a mix of market sale (134 new homes) and affordable social rented (102 new homes) accommodation;”

“Target Rents

3.5 On 18 July 2011 the Executive agreed to adopt a rent equivalent to the HCA Target Rent levels for affordable developments in South Kilburn until Borough wide rent levels were reviewed. The 18 July 2011 Executive report set out the background to the rent level change and concluded that setting HCA Target Rent levels on phases 2 and 3 and subsequent phases is the only realistic way of affording the South Kilburn regeneration

programme and avoiding the requirement for large amounts of grant that would not in themselves be certain of being awarded and, if awarded, would require rents to be increased to the new 'affordable rent' levels.

3.6 The Target Rent regime controls rent levels in the social sector. Target Rents are calculated by a formula, the basis of which is set out below. Increases in Target Rent levels are also pegged to inflation and subject to an overall cap.

• 30% of a property’s Target Rent is based on relative property values compared to the national average

• 70% of a property’s Target Rent is based on relative local earnings compared to the national average

• A bedroom factor is then applied so that, other things being equal, smaller properties have lower rents”

“3.7 Between 2010/11 and 2014/15 increases in Target Rent levels and caps have been linked to RPI as set out in the tables below:”

“Last year Government introduced a new rent policy, and for the ten years 2015/16 – 2024/25, increases in rents in the social sector will be limited to CPI +1% and increases in rent caps will be limited to CPI + 1.5%.”

“3.8 It should be noted that new social rented properties being developed in South Kilburn have a higher capital value than existing Council properties and therefore will attract ahigher Target Rent under the formula outlined. Inflationary rent increases on these newproperties, whilst governed by the same rent policy and same CPI +1% limit, willtherefore also be higher in monetary terms (i.e. in pounds sterling). This is because 1) inflation will be applied to a higher base Target Rent and 2) the Council will sometimes (and more commonly than the Registered Providers managing the new properties in South Kilburn) not apply a full inflationary increase to rents across its own housing stock.

3.9 In line with the Council's commitment to maintaining current HCA Target Rent levels inregeneration areas it is recommended that the Cabinet agree to set the rent levels forthe affordable units at Gloucester House and Durham Court and the Post OfficePlusSite once complete, at rents equivalent to the HCA Target Rent levels.”

“Your enquiry regarding affordable rents has been forwarded to me for reply. I have provided a brief explanation of the position below but please let me know if you would like any additional information or technical detail.

Target rent levels relate to Social Rented Housing, whether owned by a Council or by a Housing Association. These are based on a national formula that takes account of the capital value of the property and a factor for regional (London) earnings. They do not directly reference private rented sector rents. Target rents therefore vary across properties and boroughs. In Brent, as in many authorities current rents are below target rents but have been gradually moved towards them recent years under the government’s rent restructuring formula.

Current average rents for Brent’s council properties (which for larger properties are below target rents) are:

Bedsit - £93.91 / week

1 bed - £107.07

2 bed - £119.43

3 bed - £130.80

4 bed - £141.63

New affordable housing development is typically at Affordable Rents. These are directly based on market rents and are the lower of the maximum Local Housing Allowance (Housing Benefit) rate and 80% of the market rent (including service charge). Brent Council has a published Tenancy Strategy, that housing associations are required to have regard to, which provides guidance on maximum Affordable Rents. These set lower limits in order to support affordability, particularly for households who may be affected by the Overall Benefit Cap. The guideline limits are as follows:

1 bed – 70% market rent

2 bed – 60% market rent

3 and 4 beds – 50% of market rent”