Rent Increase 2019

We review our rent and service charges every year to ensure that the services we provide have adequate funding in order that we can deliver them.

In accordance with the Scottish Social Housing Charter, we consult all of our tenants on our proposed rent increase, and this year we received a good response to our consultation.

We consulted on two options, being an increase of either 2.8%, which would allow us to continue providing services as we currently do, or 3.6% which would have allowed us to fund the employment of an estate caretaker to carry out various tasks through the estate.

69.2% of respondents voted in favour of the 2.8% increase, 19% voted in favour of the 3.6% increase and 11.8% voted for “other”.

During the period of the consultation however, CPI fell from 2.4% in October to 2.1% in December, whilst RPI fell from 3.2% in November to 2.7% in December.

In light of the reducing inflation indicators Knowes Committee agreed to a rent increase of less than that which was consulted on, this being 2.6%

Why do we need a rent increase each year?

Inflation is the measure of how much costs are going up over time. And unfortunately Knowes like all businesses are subject to cost increases due to inflation. For example our long term contracts for repairs, gas servicing, landscape maintenance and close cleaning all have a built in inflation factor each year, meaning that the costs of delivering these contracts goes up year on year.

As a responsible employer our staff receive a pay award each year, normally below RPI.

Government legislation requires us to spend additional money on our properties, and also impacts our management costs. For example, over the next 2 years we are required to spend around £400,000 upgrading fire and smoke detection in all our properties, whilst Universal Credit is requiring us to increase our staff resource and at the same time resulting in increasing levels of rent arrears. The costs of this are borne by rent income which is our main source of income.

Affordability

As part of the rent survey we asked if tenants felt their rent would be affordable following a rent increase of 2.8%. 61% of respondents said they felt their rent would be affordable, however as noted, we implemented a lesser rent increase.

The Scottish Federation of Housing Associations has also produced a rent affordability model, and we use this to check the affordability of our rent.

We appreciate that many tenants do not get pay rises in line with inflation, however we still need to meet the increases in our running costs.

Comparability

As part of the rent setting process we compare our rent and rent increase with other Housing Associations.

Our rents are well below the Scottish average and also below the average within West Dunbartonshire.

The average rent increase this year across all of the West Dunbartonshire Housing Associations is 2.87%, and therefore our increase is below average and keeps our rents on average less than other Housing Associations in the area as well as across the country.

Viability

As a responsible business we need to ensure we are viable in the long term. To do this we prepare a 30 year business plan.

We have an obligation to maintain our properties, to meet the Scottish Government’s energy standards, fire detection standard and Scottish Housing Quality Standard, all of which require significant investment.

We have a loan which was used to purchase the properties we own, and we need to be able to meet the loan repayments, the cost of this may increase in the future as interest rates fluctuate.

We need to be able to demonstrate to stakeholders that we will have the means to meet our obligations in the future. To do so we need to factor in inflation along with all other costs. If we do not allow for inflation, i.e. rent increases, we would not be able to continue trading after more than a few years.

Like all businesses, we need to consider a number of scenarios in the future, we cannot be certain about what interest and inflation rates will be in the future. We need to make sure we have cash reserves to pay for the maintenance of our properties, but we also need cash reserves to pay for unexpected items such as the new fire safety regulations.

To do this we generally look to carry reserves of around £2m, please ignore any social media articles which suggest we hold £30m in cash as that is not the case.

The charts below detail our income and expenditure and lets you see where your rent is being spent.

Our Housing Management staff are happy to speak to anyone who is having difficulty in paying their rent, and we are also funding the provision of money advice to help local residents obtain the best advice about their benefit entitlement and on managing their money.

Rent chart 1Rent chart 2

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