Social landlords in Wales are modelling the impact of an English-style rent cut, as the Welsh Government considers following George Osborne in tearing up the rent formula.
Housing associations and councils have been given until mid-August to produce statements of the effect on business plans of dropping the current Consumer Price Index (CPI)-linked settlement.
It comes as the Labour-run Welsh Government faces political pressure to follow Westminster in forcing landlords to reduce social rents to cut the housing benefit bill.
The current five-year settlement, due to run to 2019, is CPI plus 1.5%, which is 0.5% higher than the 10-year settlement in England dropped at the summer Budget in favour of a flat 1% decrease for four years.
At a meeting in the week after last month’s Budget, landlords were told to model the impact of switching to CPI plus 1%, CPI flat, a rent freeze or an English-style reduction.
One social landlord, who preferred not to be named, said: “[The reduction] breaks most business plans in year two.”
However, others praised the government for working with the sector to establish the impact of the cut before making a decision – in contrast to Westminster.
Mike Owen, chief executive of Merthyr Valley Homes, said: “I think it’s a really good move by the Welsh Government to model the impact before making its mind up.”
Another chief executive added: “We have a closer relationship with government than the English landlords, and it’s good that they are prepared to consult with us on this.”
The government is understood to be concerned that the policy difference with England could become politically embarrassing in the build-up to the Welsh Assembly election next year.
Stuart Ropke, chief executive of Community Housing Cymru, said: “[Welsh government] has got to stay brave and look to the long-term here, rather than thinking short-term.”
A Welsh Government spokesperson said: “Following the UK government’s summer Budget, the Welsh Government has started to work with social housing partners to gather information and identify the impact any changes might have.”
The Scottish Government confirmed there are no plans to introduce an English-style rent cut in Scotland.
AT A GLANCE: Welsh social housing sector
