Edinburgh Council considering sharp rent increases to recoup losses
Edinburgh City Council bosses are considering raising council housing rents by 2.5% every year for the next four years - in a bid to recoup losses caused by a forced rent freeze this year.
Last month, a rainbow coalition of opposition Conservative, Liberal Democrat and Green Party councillors won a rent freeze for council tenants at a full council meeting.
As part of the city’s 2021/22 budget, the SNP/Labour ruling administration had proposed increasing rent for the council’s 20,000 tenants by 2% in order to help fund a 30-year improvement and renovation plan for its aging housing stock.
The rise would have netted £2m for the council for the coming financial year, and the ruling coalition said the majority of households would feel no impact on their income, as Universal Credit would cover the increase.
A one-year rent freeze means a reduction of £2m in projected gross rental income in 2021/22, or £1.9m in net income.
Unless income is increased in future years to compensate this equates to a £93.9m reduction over the lifetime of the council’s housing plan.
However, opposition councillors successfully argued for a rent freeze, and the SNP/Labour minority subsequently lost a vote on the matter.
Now, council officers are looking at four options to make up the cost of the one-year rent freeze.
The first option would be to increase rent by a minimum of 2.5% over the next four years, or to have one large increase of 4% in 2022/23 and then revert to the proposed 2% rises from then on.
The second option would be to reduce capital investment in the council’s housing stock.
A report outlining the options, and sent to councillors sitting on the council’s homelessness and housing committee, reads: “Whilst the budget motion proposed that the rent freeze be paid from contingency and reserves, unless income was increased or revenue expenditure reduced and sustained, this is not a one-off contribution.
“Capital investment funded from revenue is used to reduce capital borrowing requirements.
“£2m could support approximately £35m of capital borrowing which could enable 285 new social rented homes to be built or 1,000 homes to receive whole house retrofit to help the council achieve this net zero carbon target.”
The third option would be to reduce revenue expenditure - although the council’s Housing Service Improvement Plans already assumes a 12% reduction in annual expenditure by 2025/66.
The report reads: “Detailed forecasting is currently taking place to map out where and when savings will be achieved.
“This is already an ambitious improvement programme. It is therefore not realistic to assume that a further reduction in revenue expenditure could be achieved through efficiencies alone.
“Service reduction would therefore need to be considered - £2m equates of around a fifth of the annual staff budget for the Housing Revenue Account.”
The final option would be to elongate the Housing Revenue Account’s capital programme, meaning capital expenditure would be delayed.
The report reads: “The 2021/22 HRA Budget Strategy set out a capital investment plan that sought to build 10,000 new council led homes by 2027, achieve net zero carbon by 2030 and bring existing homes and neighbourhoods up to similar standard of new build over the next 20 years.
“For example, if the modernisation of existing homes and neighbourhoods was delivered over a 30-year period, instead of 20 years, this would substantially reduce borrowing requirements over the first ten years of the business plan.”
The council’s homelessness and housing committee is due to meet on Thursday March 18 to deliberate on the proposals.
Cllr Kate Campbell, Housing, Homelessness and Fair Work Convener, said: “In how we manage the Housing Revenue Account I do believe that all councillors’ intentions are to deliver the best outcomes for both our existing tenants, and future tenants.“But that means we need to invest, to build desperately needed new council homes, and to make improvements to existing homes. The paper for committee sets out some of the options we could use to try to mitigate the impact of the rent freeze. But we’re not taking a decision this week – we’re just starting the discussion.“I believe all councillors will work constructively together to find the best outcomes for a tenants and protect investment plans as much as possible. We’ll have those discussions over the coming months as we shape our budget strategy for next year, ahead of consulting with tenants – which is the absolutely crucial part of this process.”