Rent consultation
If you are a tenant of Knowes HA please take the time to participate in our rent consultation exercise and answer the questions at the end of the form and give your comments as appropriate. You can use our online link to respond to the survey, email your answers back to us, give your answers via telephone or drop your response into the office next time you are in.
Your answers are important to us. We will take on board your responses and the comments you make to help shape future services and review the affordability of our rents.
Knowes’ Management Committee, as an important part of the annual budget process, is required to review the rents the Association charges on an annual basis and decide whether it will be necessary to increase these rents for the forthcoming financial year 2020/21 (1st April 2020 to 31st March 2021).
Knowes is legally obliged to consult with tenants when setting its annual rent increase. This is covered by the Housing (Scotland) Act 2001 and is also recommended practice by the Scottish Housing Regulator.
Knowes must ensure that it has a viable long term business plan in place. By a viable long term business plan we mean that we have to meet the costs of repairs and maintenance, capital replacement of housing components such as kitchens, bathrooms, roofs etc. as well as pay the salary costs of our staff and overheads in our office, such as IT systems, postage, stationery etc., as well meet the payments on our long term loan.
The standard is set by The Scottish Social Housing Charter with regard to rents so that “a balance is struck between the level of services provided, the cost of the services, and how far current and prospective tenants and other customers can afford them”.
Moreover the Scottish Housing Regulator in a paper on rents, published in November 2016, recommends that in relation to consulting tenants about rent increases social landlords should consult tenants about rent increases in ways that enable them to express informed views on options for different rent levels with clear information on what they mean for services and investment in homes. You can read the paper at https://www.housingregulator.gov.scot/media/1218/thematic-consultation-on-rent-report-7-november-2016-final-version.pdf
Considerations for Knowes Housing Association when setting rents:-
There are a number of risks which affect Knowes and which the Management Committee need to consider when setting rents.
1. The rate of inflation – CPIH and CPI (Consumer Price Index) in October stands at 1.5%. (Retail Price Index is 2.1%). The higher the rate of inflation then the higher Knowes’ own cost increases will be.
2. We need to look at how affordable our rents are to our tenants. Although the rate of inflation is fairly constant, with prices of most goods and services continuing to rise, in most cases wage increases are still low. The Management Committee will always consider the issue of affordability when setting rents. The higher the rent increase then the less affordable our rents become to tenants. We wish to avoid this.
3. We need to assess how Knowes’ own costs increase year after year. The rate of inflation inherent in Knowes’ own costs can be higher than the official rate of inflation. This is influenced by how much building costs are rising by and also Government Taxes which affect costs such as property insurance. We estimate that the rate Knowes’ costs are increasing by is around 3% per annum.
4. The interest rate we pay on our borrowings is also a risk factor. Interest rates now stand at 0.75% and we do not know how these will be affected in the coming year. Knowes is still paying back the money which we borrowed to buy the existing properties from Scottish Homes. We also utilised our loan to develop new properties and improve existing ones in the years since the stock transfer.
5. Welfare reform and Universal Credit are affecting our tenants which means that we have needed to employ more staff at Knowes to assist with Universal Credit applications and deal with arrears arising from tenants who are finding it difficult to pay their rent whilst they are waiting on their application for universal credit being approved. With the advent of Universal Credit we have also seen arrears increasing and we need our staff to engage with tenants as early as possible to ensure that rents are paid. Without the rent money coming in we would have no money to pay for services and repairs therefore arrears control is one of the top priorities for housing officers at Knowes.
6. There is new Government legislation all the time and although the intention of this is to ensure tenants receive a better service – this comes at a cost. Government legislation - such as the Energy Efficiency Standard for Social Housing (EESSH) – all have cost implications for Knowes’ stock.
7. Knowes’ aging stock profile will lead to higher future repair costs and we have to be planning for that now.
8. There have been demographic changes in the population with more elderly people in our population and more single parent households. There is an increased demand for more low rise properties with gardens and more adaptable properties for an aging population. Knowes has to consider changes in needs and aspiration of our tenants and plan accordingly for houses for the future.
9. Change in computer software systems, need for increasing computer security, continual improvement in customer service, Government reporting requirements – all these have cost implications for Knowes. We would like to introduce services which allow tenants to pay their rent and report a repair online or via an app. We feel that this would improve the way we do things and offer a better service to tenants – but this will come at a cost.
10. General Data Protection Regulations and Freedom of Information – in order to fully comply with these means cost implications for the Association and its suppliers who will in turn pass the costs on to Knowes.
11. Knowes’ original business plan was built on RPI plus 1% rent increases each year. According to our original business plan we should have a rent increase of 3.1% in April 2020. However we feel that this would make our rents unaffordable to our tenants. This means that Knowes has to continually look for efficiencies in its costs to ensure that we meet the original business plan conditions and the commitments we have made to our tenants.
It is the task of the Management Committee to consider ways to mitigate all of the above risks. To do this they examine the recommendations made by the Management Team at Knowes using long term business forecasting and scenario planning. This means that the Committee look at income and expenditure over a thirty year period for Knowes with assumptions for inflation, interest rates, income, expenditure and including capital costs of improving houses. These assumptions are then varied to take into account the risks above and the effect on the business plan is assessed.
By performing this analysis the Committee is able to ascertain the minimum rent increase required to ensure that the organisation is financially viable over the long term and to ensure that the Association’s property assets are maintained to the required standards and tenants’ interests are safeguarded. This is a balancing act and the question we need to answer is: - ‘what is the minimum rent increase required to ensure that our business model continues to work for our tenants?’
Taking into account all of the above, for 2020/21 the Management Committee wish to consult the tenants on a rent increase of 1.7%. The Management Committee feel that to offer different rent options would not be in the best interests of tenants as offering additional services at a higher rent increase would not be affordable to many tenants.
It was felt that 1.7% was the minimum rent increase needed to maintain the standard of service that tenants receive now. However within the survey you will also be asked to comment if you feel that the level of service you receive should increase and how much you would be willing to pay for that. Conversely you will be asked if you feel that the proposed rent increase is affordable to you and if not can you identify which services could be cut in order to have a lower rent increase or no increase at all.
Effect on Knowes’ rent levels of proposed rent increases;-
Apartment size |
no in stock |
average weekly rent 2019/20 (includes tenancies with close cleaning charges). |
Average weekly increase with 1.7% |
2 APT |
80 |
£70.59 |
£1.20 |
3 APT |
563 |
£75.87 |
£1.29 |
4 APT |
362 |
£84.39 |
£1.43 |
5 APT + |
35 |
£100.31 |
£1.70 |
OVERALL AVERAGE |
1040 |
£79.25 |
£1.35 |
|
|
||
Gross income |
2019/20 projected rental income |
2020/21 projected rental increase at 1.7% |
|
per week |
£82,424 |
£1401 |
|
annual |
£4,286,045 |
£72,862 |
|
Each 1.0% rent increase is a difference of on average 79p per week per tenant per rent and means around £42,723 additional income to Knowes per year. A zero rent increase this year would mean that Knowes would lose £72,862 per annum per year forever compared to a 1.7% increase. This is not sustainable in our business plan. With a zero rent increase each year it is estimated that without significant cuts in services we would go out of business in 13 years. Knowes cannot afford to take a short term view of our finances as we exist to provide homes for life for our tenants. Unfortunately the rising costs of materials and work is outwith our control and may be made even worse in the short to medium term by Brexit.
To ensure affordability to our tenants, Knowes also benchmarks its rents against other social housing providers in West Dunbartonshire and the Scottish social housing average.
Comparison figures for rents for West Dunbartonshire RSL’s are not available yet for 2019/20. However we do have figures from the Scottish Housing Regulator ARC returns for 2018/19 as below:-
ARC Indicator 2018/19 |
Knowes HA |
Scottish Average |
C17 Lettable self-contained units - Total - Average weekly rent
|
£77.25 (this figure contains close cleaning charges |
£79.08 |
1 - Percentage tenants satisfied with overall service provided by landlord
|
91.04% |
90.12% |
29 - Percentage tenants who feel rent for their property represents good value for money. |
82.11% |
83.25% |
31 - Percentage gross rent arrears of rent due
|
2.02% |
5.67% |
34 - Percentage of rent due lost through properties being empty
|
0.22% |
0.88% |
35 – Average calendar days taken to relet a property
|
7.43 |
31.89 |
As you can see from the above figures, Knowes performs higher than the Scottish average for housing providers for most of the key rent performance indicators. With regard to the percentage of tenants who feel their rent represents good value for money only 6.7% of tenants feel the rent does not represent value for money. The committee has taken this on board in their deliberations and we feel that a rent increase of 1.7% option is fair in the current climate and when bench marked against RSLs will be less than the average rent increase consulted on by other social landlords.
Given the above information we would like you to answer the following questions. We would prefer your responses to be via our website, we will also be emailing a link to the survey to tenants whose e-mail addresses we hold, but if you do not have online access then we are happy for you to telephone and speak to a member of staff at the office or complete the form below and hand it into the office next time you are in. We would like to receive your responses before 10th January 2020. Each response will be entered into a prize draw with a chance of winning £75.00 of vouchers.
Rent Survey 2020/21 for tenants of Knowes Housing Association Ltd
Please complete the following Rent Consultation Survey for 2020/21. For your response to be considered you will need to complete your name and address details at the end. This will ensure that we do not include duplicate returns or responses from customers who are not tenants of Knowes. However we will treat all information given to us in accordance with General Data Protection Regulations. This form should be completed by the named tenant in the household – joint tenants may complete one survey each. It is recommended that you read the rent consultation document above before completing this form. Please complete and return by 10th January 2020 and you will be entered into a prize draw with a chance to win £75.00 worth of vouchers.