Social landlords are taking financial hits running into millions of pounds after abandoning hope of securing exemptions from the housing regulator to forthcoming rent changes.
Stock transfer organisations had threatened legal action after the government decided to scrap rent convergence – the process of gradually increasing rents until they align with an optimum ‘target’ social rent – from next April as part of a new rent settlement.
Inside Housing reports that rent reforms will hit stock transfer organisations especially hard because much of their stock charges below-target rents as a result of previously being owned by the council. As a consequence, it will cost large scale voluntary transfer (LSVT) organisations millions and force them to curtail ambitions to build new homes.
The Homes and Communities Agency (HCA) has confirmed it will only offer waivers where a provider’s viability is at stake.
Alison Thain, chief executive of Thirteen Group, which includes Tristar Homes that took 10,000 properties from Stockton-on-Tees in 2010, told Inside Housing: “We didn’t request a waiver because the signal from the HCA was they would only consider it if it put financial plan at serious risk.
“We estimate the loss at about £1m. It’s not ideal… but we are living with it.”
Plymouth Community Homes said it was not applying for a waiver and would keep its development plans ‘under review’. In May, it told Inside Housing its plans to build 750 homes would have to be reduced to 250 without a waiver.
It is understood plans for legal action over the changes have been shelved, with providers seeking ways to absorb the costs within their businesses.
Cath Green, chief executive of First Choice Homes Oldham, said it would not apply for a waiver and would lose £150,000 per year from its business plan as a result.
Steve Stride, chief executive of Poplar Harca, said it was currently in discussions with the HCA over a waiver and not getting one ‘would put us in a very difficult position within two years’.
It comes after Bolton at Home was sent a ‘letter of comfort’ assuring it that the regulator would grant a waiver in April. It is understood this was necessary to assuage lenders’ concerns that it would breach loan covenants without one.
Jonathan Walters, deputy director of strategy and performance at the HCA, said: ‘Landlords should come and talk to us as soon as possible if they think they will need a waiver, but the focus of any discussion will be around their ability to meet the viability standard.’
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