Review of residential rents and service charge

Report: 10
Date: 16 February 2006
By: Commissioner

Summary

To determine the level of rent increase for 2006/07 that is to be paid by officers who live in MPA residential accommodation.

The Police Federation has been consulted in the process of preparing this report.

A. Recommendations

That

1. Members’ views are sought on the appropriate increase to be applied in 2006/07 for:
   • the rent on residential quarters (RQs); and,
   • the service charge payable on section house bedspaces (SHs).
2. to note that the MPS recommends the following increase:

An overall average increase of 3.2% to be applied to both the rents payable on residential quarters and the service charge that is paid in respect of section house bedspaces.

B. Supporting information

Introduction

1. Attached at Appendix 1 is a copy of the current (April 2005) rent and service charge schedule.

2. When the current rent structure was established in 1994, the rents on MPA houses and flats were related to median housing association rent levels across London and then applied in relation to each property’s Council Tax banding.

Residential Quarters

3. At November 2005, the MPA held 630 properties for use as quarters, of which a total of 249 tenancies have been granted that are subject to the payment of a rent. The remaining tenancies are to officers who have a right under Police Regulations to free accommodation, having joined the MPS prior to 1994. The median rent that is currently paid is £403.00 per month for a three bedroom unit

Options

4. Option One: Increase rents in line with the budget provision (average 3.0%) - when the 2006/07 budget for rents was reviewed in late winter 2004/05 comparable data for the 2006 review was not available. The budget made provision for a forecast increase in average housing association rents of 3%. This increase was used to produce a budget provision for 2006/07 of £1.246m. Under this option the current median rent would rise to £415.50 per month. Appendix 2 shows the detailed effect on the MPA rent schedule.

5. Option Two: Increase rents in line with the Retail Price Index (average 2.4%) - if rents were increased to reflect changes to the Retail Price Index (All Items) – RP02, as measured over a 12 month period ending in November 2005, the current monthly median rent would rise to £413.00. Appendix 3 shows the detailed effect on the MPA rent schedule.

6. Option Three: Increase rents in line with latest information on London housing association annual rent increases: (average 3.2% - depending upon size of accommodation) - the standard rents for two, three and four bedroom units would rise by 3.84%, 3.25% & 2.50% respectively. The monthly median rent would rise to £416.50. Appendix 4 shows the detailed effect on the MPA rent schedule.

Section Houses

7. In November 2005 there were 435 permanent residents, of whom 395 paid the service charge, having joined the MPS after 1994 when new employment terms and conditions were introduced. The current service charge is £358.50 per month (see Appendix 1).

8. Traditionally the increase for section house service charge has been linked to the rise implemented for residential quarters, which in turn is structured upon rent levels set by housing associations for their own properties.

9. The monthly average room occupancy level across all section houses has fallen from 606 in 2004 to 483 in 2005. The section house estate is outmoded and it is believed that this is a contributory factor to the lower level of demand that has been experienced this year.

10. As an alternative more modern hostel style facilities are available from other public sector providers such as Keystart Housing. The charges vary, but for Keystart properties it is typically pitched between £400 and £450 per month. Although this range exceeds the current section house service charge, the standard of provision is much higher than is found within the MPA estate.

Summary of Options

11. Option One: to increase the service charge by the budget provision (overall 3%) - this would raise the monthly charge to £369.50 per room (see Appendix 2).

12. Option Two: to increase the service charge in line with Option 2 for residential quarters (overall 2.4%) - this would raise the monthly charge to £367.50 per room (see Appendix 3).

13. Option Three: to increase the service charge in line with Option 3 for residential quarters (overall 3.2%) - this would raise the monthly charge to £370.00 per room (see Appendix 4).

Timing

All residents are entitled to one month’s notice of any increase. If the review is to be implemented on 1 April 2006, the latest date for serving notice is 1 March 2006.

Consultation

A written response was not received by the closing date for submitting this report, but a verbal response has been made to the effect that the Federation does not support any increase to the level of residential rents.

C. Race and equality impact

The MPS policies on equal opportunities and diversity will apply to the content of the review and are applied to current policies and practices used in managing the residential estate.

D. Financial implications

1. All options and the associated full year projected income streams reflect the trends arising from a continuation of lower recruitment, compared to the peaks in 2003 and 2004. These together with other demographic issues have combined to produce an overall lower level of demand by officers for both quarters and section house rooms. Proposals and recommendations as to how the estate should be adapted to reflect this down turn in demand is addressed under the Residential Estate Strategy Paper 2006 (a separate report is included elsewhere on the agenda).

Residential Quarters

2. The budget for 2006/07 made provision for a rent increase of 3%, based on an average monthly occupancy level of 250 rent-paying officers. This would raise the annualised year-end rent roll by £36k to a total of £1.246m per annum when compared with the same average occupancy level in 2005/06. There will be a corresponding change to these figures depending upon any other option that is approved.

3. A summary of all options is at Appendix 5. It shows the range of revised new MPA standard rents together with the budgetary implications for a full year.

Section Houses

4. The budget for 2006/07 made provision for an increase of 3%, which produced a projected income of £1.84m based on an average monthly occupation of 415 rent-paying officers. This would raise the annualised year-end rent roll by £55k when compared with the same average occupancy level in 2005/06. There will be a corresponding change to these figures depending upon any other option that is approved.

5. A summary of all options is at Appendix 5. It shows the range of revised new MPA standard rents together with the budgetary implications for a full year.

E. Legal implication

There are not considered to be any unusual matters that need to be brought back to the attention of members.

F. Background papers

“Research 72 - Source Guide to Local Rents: parts I & II cross tenure rents and social landlord rents”; published by The Housing Corporation.

G. Contact details

Report author: Alan Croney, Director of Property Services

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1: Section house service charge - 1 April 2005

Increase this year: 3.00%

Appendix 2: Increase this year: 3.00%

Residential quarters - rents: 1 April 2006

Section house service charge: 1 April 2006

Appendix 3: Increase this year: 2.40%

Residential quarters - rents: 1 April 2006

Section house service charge: 1 April 2006

Appendix 4: Increase this year: 3.84% (2 bedrooms); 3.25% (3 bedrooms); 2.50% (4 bedrooms)

Residential quarters - rents: 1 April 2006

Section house service charge: 1 April 2006 (Increase this year: 2.40%)

Appendix 5: Summary of options to review rents and service charge

Section house rooms

 Residential quarters

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