Council rents are set to rocket by almost £300 a month for new tenants in a drastic move to plug a multi-million pound hole in town hall finances.

The bombshell proposal comes in a report which reveals a budget for maintaining the district’s 5,100 council homes is in “financial crisis”.

It would see Canterbury City Council charging local housing allowance rates on new or empty properties - bringing the £394 average monthly rent up to £671.

The city council says it has to act after four years of Government-enforced reductions which has resulted in a £4 million annual shortfall in rental income. Now bosses want to take advantage of the lifting of those restrictions next year to make all new tenants pay “affordable” rents, similar to those charged by housing associations.

Rents for existing tenants will also be increased by the Consumer Price Index plus 1% for the next five years.

The council also blames its financial predicament on failures by East Kent Housing to submit proper maintenance schedules which has resulted in higher than expected repair costs, and problems with Universal Credit which have contributed to almost £900,000 in rent arrears.

As well as the planned rent increases, The council says it also needs to make savings of £400,000 a year and borrow to meet the shortfall.

The extra rent revenue is also needed to help stem the loss of council homes stock through “right to buy”. It would fund borrowing to build 27 new homes a year.

A complex 120-page report was presented to members of the council’s communities committee last night (Wednesday, June 26).

The committee recommended the plan is adopted in full and that the draft goes out to consultation.

'It’s a right mess and I’m extremely worried' - Cllr Alan Baldock

Strategic housing manager, Gary Peskett, says: “We need a new strategic approach that dramatically improves performance, addresses the housing revenue account’s financial crisis, tackles increasing housing need and shrinking stock numbers and makes the most of the new policy environment. Our social housing provides a lifeline for many households who cannot afford to rent or buy a home on the open market, and need outstrips supply.”

In April, almost 2,000 people were on the council house waiting list and demands for emergency accommodation for the homeless are also on the increase.

“Our long-term aim is to increase our housing portfolio,” he adds. “However, our immediate objective is to counteract the long-established decline in council housing caused by ‘right to buy’ and keep our housing numbers at their current level.

“This needs to be achieved without adversely affecting the financial sustainability of the HRA.”

The report sets out a business plan to tackle the problems which will be presented to council house tenants for consultation.

But opponents have described the plans as a “right mess” and questioned the effect on families already struggling with debt and benefit cuts.

Opposition Labour leader Cllr Alan Baldock says the past suppression of the welfare budget is to blame, along with the “hideous” imposition of Universal Credit.

“If rents had been allowed to rise gradually with inflation instead of being capped to keep the costs of benefits down we might not be in this situation,” he said.

“I have some sympathy with the council’s predicament but it is of their own Tory government’s making. We have great concerns about the affordability of these planned rents, especially when coupled with the hideous situation of universal credit which has already driven people into debt.

“I have been saying for a long time that East Kent Housing is a busted business model, although to be fair I don’t think they have had enough money to do the job properly.

“The bottom line is that our HRA has been left with this huge hole in its finances. That means there is no money to invest in new housing, which is so urgently needed.

“It’s a right mess and I’m extremely worried about where these £400,000 annual savings are going to come from. It’s not going to be quick or pretty to fix.”

The council’s business plan to rectify the shortfall will be put out to six weeks of tenant consultation, starting July 8.

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