Rent rise fears over new homes

Increasing the rents of housing association tenants to meet the costs of building new homes will mean a shortage of new properties in the West Midlands, it was claimed today.

Housing associations fear that the Government's plan to let them charge up to 80 per cent of the market rate rent on social housing will create a north south divide.

The Government intends to slash grants available to build new social housing but will remove caps that keep rents low.

The idea is that social housing can be funded more by the rents that housing associations collect. In South Staffordshire around 600 new homes are needed each year but currently only around 200 a year are built.

There are concerns that areas like the West Midlands cannot put rent up by much more before they reach the 80 per cent threshold, meaning they will not have much more money for new housing. In areas like the South East rents are kept artificially low meaning that there will be more funding for new homes if they are increased.

Ursula Bennion, director of housing development at Housing Plus, which has 5,500 properties in South Staffordshire, Cannock, Stafford and Bridgnorth, said: "We are still waiting for the Homes and Communities Agency to reveal details.

"The national budget for social housing was reduced by 63 per cent in the spending review. On the back of that they introduced flexibility and rents of up to 80 per cent of market rate can be charged. In high value areas of London it can mean a massive increase in rent but here there is not a big divergence between the open market and social housing."

Ms Bennion warned that the pressure on the public purse may be increased. "If we increase rents then housing benefit will have to go up to counter it," she said.

The new rates will not affect council housing. Wolverhampton housing chief Councillor Peter Bilson said: "We're nowhere near achieving the targets for social housing."