Rents for residents in Camden’s council homes could go up by 4.1 per cent in 2022 – meaning families in a two-bedroom flat face paying an extra £250 a year.
The proposed increase would generate £4.95m of income for the Town Hall.
The move follows new government guidance allowing councils to put rents up by the comsumer price index plus one per cent . It comes after four years of them being told to cut rents.
Most tenants who get housing benefit and universal credit would get an uplift to cover the rent increase.
The council’s finances were hit hard by the pandemic. The Housing Revenue Account (HRA) saw a drop as some tenants, leaseholders and commercial tenants “faced significant financial struggles”.
The rent hike would see a weekly increase of £5.42 for people in a three-bedroom home, and £6.66 for those in homes with five bedrooms or more.
The proposals will be considered by politicians at January’s housing scrutiny meeting and are being discussed by district management committees.
A report is coming before Camden politicians this week.
By law, the council has to have a balanced HRA, so it cannot spend more than it receives.
Between 2016 and 2020, the government told councils to cut rent by one per cent a year. A report by head of finance Daniel Omisore said this meant a loss of an estimated £69m, and the council brought in savings to help balance the books.
The council said this meant the current average rent is only 80p more than the average rent paid six years ago.
It has seen its reserves drop by nearly half from £39.2m in 2015/16 to £20.4m in 2020/21. It is predicted to drop to £14m this year, with further reductions the following year. The council hopes to start building up the HRA reserves in 2023/24.
“The reserve is currently at a very low level for the size of our HRA and our projected requirements,” said Omisore.
Since April last year, councils have been allowed to increase rents by the cosumer price index plus an additional one per cent, meaning it can push them up by a maximum of 4.1 per cent.
“It is a very difficult economic environment for the HRA to operate in –
inflation and energy prices are rising fast at the same time as changes in building and fire safety legislation,” said Omisore.
In a report prepared for the housing scrutiny committee next Wednesday, he warned that the HRA faces an “extremely challenging” few years, with limited options for raising income and the need to make savings.
Building material costs are also up by five per cent this year, ahead of a predicted three per cent rise in 2022.
The Building Safety Bill that is likely to come into force next year after the tragedy at Grenfell Tower means landlords may face extra responsibilities and costs to ensure the safety of high rise towers.
The increase in gas and electric costs will also have a “significant impact”, Omisore explained.
He added that proposed rent increases “are difficult for tenants in the current economic climate, and the risk of non-payment can be seen in increased rental arrears over the last year, driven by a large increase in Universal Credit claimants”.
The council is only allowed to pass on charges to its leaseholders for what it spends delivering services such as communal cleaning or lighting blocks of flats.