Page last updated at 17:30 GMT, Friday, 6 March 2009

Cash to cut council rent rises

Council estate in Hull
Ministers said they wanted to give tenants a fair deal

Councils in England will be given up to 175m in extra cash to allow them to limit rent increases and help hard-pressed tenants, ministers have said.

Housing minister Margaret Beckett has changed the advised weekly rent increase for 2009-10 from the 4 proposed in September to under 2.

This was a "fair and affordable" deal in challenging times, she said.

Councils welcomed the step, but said they should be allowed to retain all their rental income in future.


Under the current system, all rental income is returned to central government and then redistributed, in turn, to councils.

The Local Government Association (LGA), which represents hundreds of English councils, said Whitehall retained 300m a year which councils should instead keep to improve their housing stock.

In a written statement to Parliament, Mrs Beckett said she was reducing the average guideline rental increase from 6.2% to 3.1% in light of the current economic climate.

It is pleasing that the government has recognised people are feeling the pinch
Local Government Association

When the 6.2% figure was proposed in September, the inflation rate was close to 5%. Since then it has fallen to less than 1%.

She said the government would make funding available to local authorities to facilitate this and would also review the rental situation for 2010-2011.

Although it is up to councils to decide the level of rent rises, she said she expected tenants to see the "full benefits" of the offer.

"We have listened to what councils and their tenants have said to us about the planned rent increases and we are determined to help tenants get a fair and affordable deal," she said.

Councils would be "encouraged" by the announcement, the LGA said, but far-reaching reform of the rental system was needed.

"It is pleasing that the government has recognised people are feeling the pinch and will not be pushing through a 6% rise," said Margaret Eaton, the organisation's chairman.

The Lib Dems said the government should no longer "claw back" councils' rental income, saying this amounted to a "tenants' tax".

"If local authorities were allowed to hold on to this money in the first place, tenants could already be paying lower rents," said the party's housing spokesman Sarah Teather.

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