Housing Committee’s continuing committment to the policy of raising fair rents

1240/5(1789)

QUESTION TO BE ASKED OF THE PRESIDENT OF THE HOUSING COMMITTEE ON TUESDAY, 4th FEBRUARY 2003 BY DEPUTY G.P. SOUTHERN OF ST. HELIER

Question

In response to my question to the President of the Housing Committee on 21st January 2003, the President indicated his continuing commitment to the Committee policy of raising fair rents to within 10 per cent of levels in the private sector.

The following table shows the changes to the Housing Committee's annual income from rents and abatements for the years 1999 to 2000 along with the annual percentage increase in "fair rents" and estimates for the years 2002 and 2003. (Source: Treasury Accounts 2000 and 2001, Budget 2003)

1. For eachoftheyears 2000 to 2003, will the president inform memberswhat proportion of the net increase is accounted for by the percentagerise in fair rent', and how much canbe attributed toother factors?
2. In particular, can the president explain why the estimates for both abatementand net increase for 2002 have remained static despite a 7.9 per cent increasein fair rent lastyear?

Answer

1. The percentage rise infair rent in eachofthe three previous years has only had a relatively small effect on the rentalincome received netofabatement. This will alsoapplyin 2003, and is because,asabout85per cent  of  Committee tenants  receive  an abatement, only  about 15  per  cent  of tenants  pay the  relevant percentage increase on theirrent.

 A  s there is considerable movement in tenancies and tenants' incomes, it is not possible to break down

accurately how much of the increase in net rent (rent less any abatement) in each year is attributable specifically to the rent increase. However it is estimated that the rent increase element as part of the net rental income in the years 2000 to 2003 is as follows -

Year  % Increase in  Net Rental  Increase over  Attributable to    Rent Income   previous year  Rent Increase

£  £  £

2000  5  12.8m  1.1m  196,000

2001  5.5  13.4m  0.6m  226,000

E2002  7.9  14.07m  0.607m  332,000

E2003  3.5  16.2m  2.13m  166,425

I t can readily be seen that the net rental income each year is affected by factors other than the gross rent

increase. These include -

( i) stock growth and changes in the Housing stock – new build dwellings at higher rents as well as

demolition of lower rent dwellings and temporary loss of buildings;

( ii ) ch a n ges in the average earnings index;

( ii i) re s o urces spent on anti-fraud measures and the  verification of claims for abatement; and ( iv ) o p p ortunities for relatively wealthy tenants to self-house in the private sector.

2. The estimates were preparedat a time whenthe budgeted rental increase for 2002was3.5 per cent.However the triennial re-evaluation of the Committee'sproperty rentals wasundertaken at the endof2001and the evidence from this exercise led to the implementation of an 8.9 per cent increase, considerably in excess of the originalbudgetproposal.This will be reflected in the2002accounts.In2002abatement was budgeted at 50 per cent of rental income, slightly lower than in previous years but reflecting a downward trend.

T he gross rental income in 2002 was actually about £29.4m but rent abatement increased in line to about

£15.35m, resulting in the net increase in rent less increase in abatement remaining, at £0.55m, at a similar level to that achieved in 2001.