Rent rise of between five and seven per cent likely for Fife Council tenants next year
The decision to increase council rent is far from final, but Fife Cabinet Committee members were told that a five to seven per cent increase is needed to balance the books and maintain services.
Councillors were told that anything less than a seven per cent rent increase next year will result in unspecified service reductions.
In light of what is shaping up to be a challenging budget setting season, Fife’s Cabinet Committee agreed on Thursday to conduct a council tenant survey during December and into January.
It will ask council tenants about rent increase options of five per cent, six per cent and seven per cent. Tenants will also be asked about their priorities for housing services they wish to see protected.
The Housing Revenue Account (HRA), which is the account responsible for income and spending associated with the council’s role as a landlord, is looking at a projected £8 million shortfall for 2024-25 if rents are not raised and/or savings are not made.
Councillors were told that the HRA is experiencing a “difficult financial situation” as a result of high inflation over the last two years. The council has until managed the challenges, but a rental increase or cost savings must now be identified going forward.
“The [projected] budget gap of £8.055 million is a result of increasing financial pressures faced by the HRA. This gap will require to be funded through increased rental income, savings or a combination of both,” the committee report stated.
“Taking into account the financial pressures facing the HRA, a decision has been made not to consult on any rental increase below five per cent. It is council officers’ opinion that a rental increase of between five per cent to seven per cent balances both the need to maintain rents at an affordable level for tenants and the financial requirements for the HRA.”
The report continued: “A rental increase of below seven per cent will create a budget gap which will require further savings to close.”
An SNP amendment to consult tenants on lower two per cent and four per cent options was shot down 13 to nine.
“I think it’s unreasonable at this stage to bring in lower options. The reality is that setting rent at too low a level means significant cuts to services,” Council Leader David Ross (Labour) said.
“We absolutely need to sharpen our pencils to make the service as efficient as it can be, but let’s not kid our tenants that we can keep low rents without a significant impact on services.”
There was a cross party call for the council to “sharpen its pencils” to make every efficiency and savings possible before asking rent payers for more money.
Councillor Altany Craik, the Labour Spokesperson for Finance, Economy & Strategic Planning said: “We need to be sure that [this level of increase] is what we need and that we’ve been as efficient as we can to drive down costs and take out inefficiencies. I want an assurance that we are sharpening our pencils to get our costs down as far as they can and still deliver our services before we’re asking our rent payers to put their hands in their pockets to that extent.”
A 6% rent increase would leave the HRA with a £138,000 budget gap, but a seven per cent increase would result in a budget surplus for the service.
Council opposition leader David Alexander (SNP) said: “A seven per cent increase would actually give the HRA a surplus, it’s just ridiculous. A gap of £138,000 it’s not exactly a disaster. The HRA is under pressure, but so are rent payers.”
Fife’s head of Housing services John Mills stepped in to clarify that any surplus from a seven per cent increase would go towards funding HRA services and providing security for future years.
The impact on council tenants was also discussed on Thursday.
Housing and Finance Services claim that rent increase would only affect around a third of council tenants who aren’t claiming housing benefits or universal credit.
“The affordability of housing rents will depend on the circumstances of individual tenants,” the report said.
“Approximately 69 per cent of council tenants are supported through housing benefits or universal credit to pay their rent. A low rent increase would therefore not benefit the majority of tenants but would instead benefit HM Treasury.”
Councillors were told that there is also a £2 million rent support fund available for tenants struggling to make rent payments.
Cllr Ross reminded Cabinet members that at this stage, they are simply agreeing to go out to consultation on the rental increase option.
“We’re not taking a decision today on rent increases,” he clarified.
That final decision will be evaluated in February as part of the full HRA Budget report for 2024-25. The tenant survey results will help shape and inform that budget plan.