Cut in rents means £7m cut in income for EDDC

Government proposals for a 1% reduction in council house rents each year for the next four years means East Devon District Council faces a £7 million cut in its income by 2019/20.

The council is now asking to meet with its MPs Hugo Swire and Neil Parish to discuss the compulsory 1% rent cut which was announced in the Budget in June.

East Devon is landlord of 4,245 council homes, and its social rents, at less than £82 a week, are already well below equivalent affordable rents charged by most Registered Housing Providers.

Cllr Jill Elson, East Devon District Council’s Portfolio Holder for Sustainable Homes and Communities, said that the £7 million cut in income over the next four years would hit the council’s plans to invest in maintaining its current properties and affect any plans to buy or build new council homes.

She said: “While a 1% reduction may seem good news for existing tenants, we may not be able to carry out the kind of maintenance on properties as we do now. We have invested £9 million each year on the repair and improvement of tenant’s homes over the last three years. It would also affect our future tenants too, as the £7 million rent income we are at risk of losing, equates to being able to provide 66 new affordable homes assuming £120,000 per home.”

The council, along with other local authorities who have housing stock, has a thirty year business plan to ensure that it is able to maintain its properties. The 1% rent cut could mean East Devon’s ring-fenced Housing Revenue Account would reduce by £77.2 million over the next three decades. This loss of income makes the business plan unviable.

The proposal is particularly unwelcome as the government required East Devon District Council to take on £84.5 million of debt in 2012 in return for freedoms and flexibilities to run its council housing free from government interference. The debt was based on the government’s assessment of income and expenditure over thirty years, and three years into that arrangement, the government is proposing to “move the goalposts”.

Cllr Elson is urging the Government to reconsider the policy. She said: “This is very short sighted and this policy has tough consequences on us as a council and on tenants too. We need to secure a more effective balance between the needs of present and future tenants in the longer term.”

The council is hoping to meet with MPs in the next few weeks.