Councils may be forced to hike rates if the State Government doesn’t step in to compensate them for lost revenue from the handover of Housing Trust homes to community organisations.

Local Government Association President David O’Loughlin says different councils will be affected differently, but councils in the outer north and east are likely to be hardest hit by the transfer.

The State Government yesterday announced 5000 Housing Trust – now known as Housing SA – homes would be handed over to non-profit organisations over the next five years, allowing the Government to achieve a range of cost savings.

Among the savings are council rates. Councils are required by legislation to offer a 75 per cent reduction in council rates to non-profit owned houses.

“There’s no doubt, if you provide a rebate to one ratepayer to cover your costs, you have to increase the rates of another ratepayer,” O’Loughlin told InDaily.

“With a large-scale transfer, that will reduce revenue from those houses. If it’s only a couple here or there, it’s not significant.

“If it’s a thousand, that is significant, and it will disproportionately affect some councils over others.

“I think non-government organisations have a lot to offer; there’s every chance it could be a successful move.

“However if other ratepayers have to have a rate increase to cover the rebate, well that’s not a good outcome for the balance of ratepayers.”

In a statement, Minister for Social Housing Tony Piccolo’s office told InDaily the community organisations receiving the houses would be asked to work with local councils to deal with the rate rebate issue.

“The Government has been in discussions with the individual councils and the Local Government Association on a range of issues regarding the transfer of housing stock to the community sector, including the issue of council rate rebates,” Piccolo’s spokesperson said.

“As part of the tendering process, the Government will be asking community housing organisations to explain how they will work with local government to overcome any issues, including rate rebates.”

The first tranche of 1000 homes will be transferred via a tendering process over the next 18 months.

The State Government has not decided where those homes will be located, although they were likely to be in those areas with the highest concentrations of social housing, the minister’s office said.

The councils of Port Adelaide Enfield, Charles Sturt and Marion have the highest number of Housing SA properties in the state.

Port Adelaide Enfield Council charges $913 a year in rates on the average house worth $342,000.

In 2012 the council earned just over $81 million in revenue from charging council rates.

In the past InDaily has reported on fears from mayors that the State Government would transfer the entire Housing SA stock to community groups. The State Government denies that is a long-term goal.

Transferring Housing Trust homes offers a range of benefits to the State Government.

In addition to getting rebates on council rates, community organisation-owned homes are eligible for Federal Rental Assistance.

Once the State Government transfers the homes they are no longer required to pay to support or maintain them.

The State Government and community organisations say the transfer of the homes will allow community organisations to take out loans to build more stock.

The State Government expects the sector will finance and build 100 new homes a year thanks to the transfer.

The LGA’s O’Loughlin said the State Government should move to guarantee that.

“If there is a development uplift promised, we want that to be guaranteed, and directed toward the replacement of older housing trust stock.

“If the non-government organisations fail to take advantage of the financial benefit and undertake development or replacement work on those old houses, that means nothing’s changed from the current scenario.”

Read full details about the transfer here.