It said the decision would deliver a very small short-term benefit to a minority of tenants – as not all would see a benefit due to rent restructuring – while causing substantial long-term damage to the capacity of the sector.
It warned that reduced rents would lead to the building of fewer homes and cuts to neighbourhood services for years to come – as the reduction in rents next year would be carried over into the underlying rent assumptions for future years.
The Federation also pointed out that a recent survey showed that 69% of housing association tenants would rather forego the proposed rent cut than suffer cuts to services.
Federation chief executive David Orr said: "This is simply the wrong decision – which will damage the ability of housing associations to deliver affordable homes and community services for many years to come.
"In an environment where the Government’s own figures forecast significant cuts in public expenditure over the coming years, a direct cut to the sector’s capacity to build homes and provide services is unwise.
"A far better balance, which protects the interests of current and future tenants, and retains the sector’s capacity to deliver homes and services, would be a rent freeze.
"Not only would this be economically rational, it would also be consistent with the Government’s own long-term rent strategy, which makes no provision for rent reductions. It is the Government which is breaking its own rules, not housing associations."
He added: "Social housing rents have never fallen before, even during two world wars and the Great Depression."
Housing associations invest £272million a year on providing a huge range of community services – and attract a further £163million from other sources to fund the work.
However, because of the rent reductions, the income to the sector will now be cut by millions of pounds. And if housing associations choose to recoup their losses through cuts to services then job training schemes, business start-up initiatives, crèches, energy efficiency programmes, recycling projects and IT classes would all be under threat.
The Federation’s poll, conducted by Populus, showed that 69% of residents would rather forego a modest cut of 0.9% in their rents if it protected community services. Only 28% of tenants backed a rent cut. Also, 77% of those polled said the community services delivered by housing associations are either "very" or "fairly" important.
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