The Department of Social Care is announcing that the annual increase in public sector rents with effect from 1 April 2012 will be 10% (ten per cent). This decision has been taken to address the rising cost to the taxpayer – around ?7m this year – due to the shortfall of rental income against annual housing costs. Over the past decade the Manx Government has invested more than ?250m in improving the Island’s public sector housing stock such that the housing is better than ever before. However rents have not kept pace with rising costs hence the need for this rise now. The average rent rise for general housing will be less than ?7 per week, with an increase of about ?7 per week for a typical 3-bed house currently paying ?70 per week. The average rise for sheltered housing will be ?2.40 per week. Households on income-related benefits – a quarter of the total – will be largely unaffected. The increased rents will still be less than 40% of the cost of the equivalent private sector housing on the Island. Also public sector rents in the Isle of Man are around half of those in comparable areas in the UK and one third of those in the Channel Islands. The Minister for Social Care Hon Chris Robertshaw MHK commented: “Public sector housing is a vital part of the Island’s housing stock, helping to provide thousands of families, older people and others in our community with affordable, high-quality homes. It is vital that this remains the case. However, the costs to the taxpayer of the existing housing stock have risen rapidly in recent years and are forecast to continue to do so. This rent rise is an essential first step to address the issue of providing affordable housing at a sustainable cost. All of the evidence shows we must act now to ensure current and future generations can access the affordable housing they need at a cost to tenants and taxpayers that is both affordable and sustainable. For more than a decade Government has rightly invested in improving the quality of public sector housing on the Island, investing over ?250m over the last 10 years alone such that the Island’s public sector housing stock is now better than it has ever been. Unfortunately, the cost of construction and maintenance of these homes far outweighs the income received from rents. The taxpayer continues to make up the shortfall, which this year is approximately ?7m, equivalent to the income from 1% of the 10% basic rate income tax (i.e. one tenth of the tax raised by the basic rate of income tax). Furthermore the cost to the taxpayer is projected to continue to rise by over ?1m every year such that roughly every 5 years the cost to the taxpayer would rise by the equivalent of another 1% in the basic rate. This situation is clearly untenable when Government is under enormous pressure to reduce current expenditure in order to address the substantial shortfall income of which we all aware while also helping to provide additional affordable housing to help those in need and to stimulate the construction sector and the wider economy. The only option in the short-term is to raise rents, as we are doing. I understand tenants will feel anxious about any increase and I want to put this increase into context. The average rent rise will be less than ?6 per week. For a typical 3-bed house, the rise will be approximately ?7 per week. I note that public sector tenants will continue to pay housing costs that are less than half of those for people in comparable private rented or private owned housing. Also public sector rents in the Isle of Man are approximately half those for comparable areas in the UK and one third of those in Jersey or Guernsey. Both my Department and the Council of Ministers considered all of the facts and the options carefully before taking this decision. I firmly believe this rise is essential, although I acknowledge the financial implications for some tenants. It is important to note that approximately 25% of public sector households are in receipt of income-related benefits and so will be unaffected as their benefits will rise in line with rents. The exception is those families on Family Income Supplement which covers 70% of housing costs, hence their rent increases will be less than ?3 per week. This rent rise is the first step to ensuring Government can provide sufficient affordable housing at a sustainable cost. It is now vital we have an effective public debate on this important topic to determine how we will evolve housing policy to achieve this goal. My Department commissioned a fundamental review of housing earlier this year to consider the Island’s future housing needs and the options available to Government to assist to meet those needs effectively and affordably. My Department is currently reviewing the findings of that review. In the New Year I will publish the review’s findings and commence consultation on a range of options to help to achieve sufficient affordable housing at a sustainable cost. I look forward to wide engagement in this matter which affects all of us, both current and future generations.” Public sector housing is financed through borrowings by the 19 Local Housing Authorities as approved by Tynwald. The deficit between the rental income and the costs of housing (including the costs of the borrowings) is referred to as the Housing Deficiency. This deficiency is not paid by the Local Housing Authorities; it is paid for by the Department of Social Care through general taxation. - ENDS -