2022 Rent and Management Fee Consultation Feedback

2022 Rent Review Outcome

The Committee of Management considered the rent review and the consultation responses at their meeting of 27 January 2022.  The Committee recognise the difficult financial position many people are currently facing, and as such they were keen to keep the increase as low as possible.  The Committee understand that choosing a low rent increase has a great impact on the future finances of the Association, and decisions will need to be made moving forward about how to manage the income shortfall. 

The long-term financial projections of the Association are based on rents increasing by CPI only each year and we traditionally use Oct CPI for this purpose.  As such, previously for 2022 the long-term financial projections would have had the Oct 2021 CPI rate as the increase.  The October CPI rate was 4.2%.

CAPPED RENTS

Some of the Association’s tenants (less than 4%) have rents that are lower than other tenants.  This situation applies to tenants who would have had a very large increase when the rent setting structure was reviewed, or when some ex Kendoon tenants transferred to Pineview (over 84% of transferring tenants had a rent decrease). 

It was decided that tenants in this position would have their rent increase capped and their annual increase would be the Oct CPI rate plus £10 in 2021, followed by Oct CPI plus £10 inflated from the previous year for 2022 and 2023 and then reviewed further for 2024.  The larger increase for these properties is applied so that the rents catch up and the inequality between tenants of the same property is removed over time.

However, in recognition of the difficulties many people are facing the decision was taken for the 2022 rent review that capped rents would only be increased by the Oct CPI rate (4.2%) and the additional £10 inflated rise due would not be applied for 2022.

NON-CAPPED RENTS

Over 96% of tenants have rents that are not capped.  In “normal” times these rents would have had an increase at the rate of the Oct CPI of 4.2%.  During 2020 tenants who did not have capped rents were promised that their rent increase would be limited to CPI only for 2021, 2022 and 2023. 

Given the difficulties many are facing, Committee reconsidered this in Nov 2021 and consulted with tenants on lower increase options.  This gave tenants the option to give their views on lower increases, whilst confirming that this would have an impact on future finances and what the Association can do.  It was recognised by Committee that tenants might wish to consider a lower increase when times are so difficult (inflationary costs to their cost of living; impending increase in energy costs etc.) and accept that a review of what can be delivered in the future will need to be considered.  As such, Committee consulted on 3 options, being Sept CPI with alternatives of this plus and minus 0.5%.  The results of the consultation were:

Of those tenants who responded to the consultation, expressing a preference for the rent increase options presented:

 Considering these responses and tenants preferences, Committee has agreed an increase for non-capped rents at 2.6% for 2022.  The rate of inflation continues to climb, with Nov CPI being 5.1% and Dec CPI being 5.4%.  As such, the 2.6% increase is at a rate of less than half of the current published inflation rate and is 1.6% less than the increase the Association previously promised to limit the 2022 increase to (Oct CPI at 4.2%).

Savings to Rents due to 2022 Rent Increase being Restricted:

Ex KHA 2022 rent comparisons

Original Pineview Properties Saving Due to Restricted 2022 Rent Increase

IMPACT OF RENT INCREASE RESTRICTION

The restrictions on the capped rents increase and the non-capped rent increases has a great impact on the short, medium and long term finances of the Association.   Whilst the impact is not massive in the first year (2022/23), the reduced income is compounded over time and has a much greater impact as time goes by.  Below details the impact in year 2022, over 10 years and over 30 years.

 The loss of income in cashflow as detailed above obviously impacts on the services and work the Association can provide.  The income we spend on tenant and property services all comes from the rents that tenants pay over several years.  Money from rents paid is set aside each year to ensure there is money available in future to undertake, for example, ongoing maintenance work and component replacements such as new kitchens, roofs etc.  As such, if we have reduced income, we must reduce what we spend and therefore what we provide. 

The Association, Committee and staff, will be working to review what we do and when, and will be considering where savings can be made to work towards reducing the cashflow loss.  We will concentrate on trying to reduce costs in areas which have the least direct impact on tenants and properties.  We will take time to consider this carefully and will hopefully be able to develop solutions to minimise the impact.  We will consult with customers on any proposed changes that will have a direct impact.