Edinburgh Council trying to avoid sharp rent hikes by finding external funding

Edinburgh City Council has agreed to search for external funding for its one-year rent freeze - after council officers warned sharp rent hikes over the next four years could be needed to make up the lost income.

Friday, 19th March 2021, 5:05 pm

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 ageing 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.

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Edinburgh Council considering sharp rent increases to recoup losses

The additional £2m income would also have allowed the council to access around £35m of capital borrowing, and unless income is increased in future years to compensate for the loss, the one-year rent freeze would equate to a £93.9m reduction over the lifetime of the council’s housing plan.

Despite this, opposition councillors successfully argued for a rent freeze, and the SNP/Labour minority subsequently lost a vote on the matter.

At a meeting of the council’s homelessness and housing committee, held on Thursday March 18, councillors looked at four options to make up the cost of the one-year rent freeze.

The council is to look at other options to avoid a rents hike.

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.

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 final option would be to elongate the Housing Revenue Account’s capital programme, meaning capital expenditure would be delayed.

However, during the meeting, councillors agreed to work together after the SNP/Labour coalition, the Liberal Democrats and the Green Party submitted rival motions that called on officers to investigate external funding streams for the rent freeze.

An amalgamated motion, accepted by the committee, reads: “[The council] notes that there is considerable support from tenants, as evidenced through the budget consultation, for increased investment in existing homes and estates and for delivery of new council social homes.

[The council] notes the Scottish Government has published Housing 2040 which sets out a strategy for housing in Scotland by 2040.

“This includes legislative changes, new funding models, new funding streams and development and research that will be carried out to help deliver the strategy over the short, medium and longer term.

“[The council] therefore requests that officers bring back a report to committee setting out the opportunities for Edinburgh, and identifying additional funding streams that could be accessed to increase investment and the likely time frames for accessing this funding.

“This should focus particularly on opportunities for increased investment in existing housing stock, regeneration and meeting our sustainability targets through retrofitting, and should form part of the annual HRA review including any risks to accessing these funding streams.”

Portobello and Craigmillar councillor, and SNP convener of the committee, Kate Campbell, said: "I’m glad that we were able to come together as a committee today to work constructively to find the best outcomes for our tenants and protect investment plans as much as possible.

“We’ll continue to have those discussions over the coming months as we shape our budget strategy for next year, ahead of consulting with tenants.

“This is the absolutely crucial part of this process as it gives our tenants the opportunity to tell us what their priorities are and make sure we are fully informed to make decisions on their behalf.

“While we have options to try and mitigate the impact of the rent freeze we have to be realistic that the HRA has been reduced.

“We therefore need to re-look at our options and go back out to tenants and make sure we understand what’s most important to them so we’re acting on their behalf to deliver the best outcomes for both our existing tenants, and future tenants.”

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