Andium: Annual Rent Increase deferral 2020

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A decision made on 6 November 2020

Ministerial decision reference: MD-H-2020-0017

Decision summary title: Deferral of the annual rent adjustment policy

Decision summary author

Senior Policy Officer,

Strategic Policy, Planning and Performance

Is the decision summary public or exempt?

Public

Report title: Deferral of the annual rent adjustment policy

Report author or name of

person giving report

Senior Policy Officer, Strategic Policy, Planning and Performance

Is the report public or exempt?

N/A~~Public~~

Decision and reason for the decision: The Minister for Children and Housing approved a one-off deferral of the annual rent adjustment required by the States rent policy to be applied to Andium tenancies (as set out in MD-H-2018-0021) for a one-year period commencing 1 January 2021.

This decision is taken in parallel with a decision by the Treasury and Resources Minister to accept a reduction to the Guarantor’s return to allow for the one-off deferral of the annual rent adjustment.

The Minister for Children and Housing has requested that Andium Homes Limited (“Andium”), acting through the Minister for Treasury and Resources as the guarantor, give effect to the one-off rent policy adjustment. This will mean there will be no annual increase applied to rentals for Andium tenancies in 2021.

The Minister for Children and Housing believes that the deferral of the rent increase will help to constrain prices in the private rental sector and provide social rental tenants with rents that they can more easily afford. The Minister has been mindful of the economic impact of Coronavirus in approving this deferral.

Resource implications:

The States social housing rent policy normally requires an annual rent increase of the September Jersey RPI figure+0.75%, with a minimum increase of 2.5% and a maximum of 4% (unless the increase is +90% of market rent, in which case it is capped at 90%). The September Jersey RPI result announced on the 23 October 2020 was 0.9% In normal circumstances, without the deferral of the rent increase, Andium would therefore have been required to raise rents in accordance with the rent policy by 2.5% at 1 January 2021.

The deferral of the rent increase has been co-ordinated with a parallel adjustment in Andium Homes’ return to the Treasury and Exchequer (Guarantor’s return) that had been expected 2021 and all subsequent years. While not directly linked to the Guarantor’s return, the impact of the rent deferral will also reduce government expenditure on Income Support costs for 2021 and all subsequent years.

The Treasury and Resources Minister has agreed to accept a reduction in the Guarantor’s return to take account of the net effect on government resources and Andium has agreed to absorb the net cost of the deferral into their business model for 2021 and all future years.

A 2.5% increase in Andium rental income is forecast to generate an additional £1.386 M in income

A 1.75% increase in the Guarantor’s return is forecast to represent an additional £0.533 M

A 2.5% increase in Andium rents is forecast to generate extra income support costs of £0.814M

The net impact of a deferral of the rent policy is an adjustment to the return to provide for a reduction in 2021 of £0.281MM. This will result in a return in 2021 of £30.194M. The Guarantor’s return is re-based at this amount and, thereafter, increased in line with Andium’s Transfer Agreement with the Guarantor.

A parallel Ministerial Decision to provide for the reduction in the Guarantor’s return will be issued by the Minister for Treasury and Resources.

Action required: Minister for Children and Housing to notify Andium Homes of the decision.

Signature

Position

Senator Sam Mézec

Minister for Children and Housing

Date signed

06/11/2020

Effective date of the decision