Agenda item

This report sets out the proposed Housing Revenue Account (HRA) Business Plan, Revenue Budget and Capital Programme for 2023/24.

Recommendation

The Executive recommends to the Council, that:

1.    the rent level for Council dwellings be increased by up to 4% from the 22/23 level with effect from 1 April 2023 within the permitted guidelines contained within the Government’s rent setting policy;

2.    the service charges in senior living accommodation be increased by 4% per week from 1 April 2023 to £20.90;

3.    the recharge for energy costs in HRA properties be increased by 4% per week from 1 April 2023;

4.    the revised HRA Business Plan for 2023/24 to 2052/53 as set out in Annexe 1 be approved;

5.    the approval change for the fees and charges as set out in Annexe 4 is noted

6.    the Housing Revenue Account Capital Programmes as shown in Annexe 5 & Annexe 6 be approved; and,

7.    the financing of the capital programmes be approved in line with the resources shown in Annexe 7.

8.    to deliver the works identified in the maintenance budgets it is recommended that authority is delegated to the Executive Head of Housing, in consultation with the s151 Officer and Co-Portfolio Holder for Housing, to procure and enter into contracts valued over £100,000 shown in Annexe 8.

86.1     Cllr Jerry Hyman left the Council Chamber having previously declared a Disclosable Pecuniary Interest in relation to this item.

86.2     The Leader introduced the HRA Business Plan, Revenue Budget and Capital Programme and recommended it to Council for approval, which was duly seconded by Cllr Mirylees. Before passing to Cllr Merryweather to provide a detailed presentation on the proposals, the Leader again thanked the Finance Officers for their hard work over many months to develop a balanced budget despite the ad hoc approach of the government in releasing information on various funds available to local authorities, even as late as January.

86.3     Cllr Merryweather, Portfolio Holder for Finance, Commercial and Assets, presented the budget proposals for the HRA:

“We now turn to the ring-fenced account into which our social housing rental incomes are received, which, together with some other income can only be used for legally prescribed purposes. These include not only the recurring annual costs of operating, administering and maintaining our Council homes but also:

·         Major repairs and upgrades;

·         New affordable home developments, and

·         The servicing and repayment of a £189m mortgage that the Council was required to take out in 2012 to transfer the HRA to the self-financing basis that it’s been on since then.

The HRA is self-financing which means that it is our Council house tenants alone who most directly experience the financial costs and benefits of the decisions that we take.  We work to a long-range business plan that extends out by a rolling 30-year horizon but this year’s review cycle has been extraordinary on at least 4 counts:

·         First, the impacts of Covid have been transitioning into impacts of the cost-of-living / inflation crunch which is affecting not only our tenants but also our own ability to provide our Landlord services;

·         Second, the government has provided us with a limited opportunity to increase rents by up to 7% ostensibly to mitigate for the cost inflation we experience.

·         Third, the pressing need to plan for the improvement of our housing stock to meet our energy performance and efficiency goals which are at least in line with those that are being set nationally by central government, and

·         Fourth, we have started to plan for the repayment of the 2012 mortgage by 2040/41 which will release a very significant net permanent improvement in the annual HRA operating account.

So it was in December 2022 that we agreed to change the mortgage debt strategy so as to rephase our net debt principal repayments to free up rent income now to fund housing maintenance and the energy efficiency programme.

Excluding both activity growth and cost savings, we expect that inflation will increase our costs by around £1.4m in 2023/24 – including legacy impacts from 2022/23 -  but that, after allowing for compensating interest and receipts, the net impact will be contained to about £1.0m.  This approximates to the 4% rent increase that is proposed in the recommendation which is also consistent, we believe, with the good intentions behind the Government’s rent cap which is “to protect tenants from the rising cost of living”.

We are well aware that not using this window to increase rents further could be perceived as a missed opportunity, as an increase above 4% could for example have a positive impact by reducing the business plan’s borrowing requirement.  Every additional 1% in rent above 4% equates to about £300k which, compounded over the 30 year business plan horizon could generate £14.8m of additional income, and could reduce the capital borrowing requirement by £4.9m.  It should go without saying that these longer term benefits do seem to be contrary at least in spirit to the more immediate need to “support the most vulnerable households in the face of cost-of-living pressures”.

Having said that, there are still other factors to consider also, including that:

·         Even if we don’t ask our tenants to finance an accelerated reduction of debt now, their rents will still have to service it in due course;

·         This is a volatile and uncertain time, and there can be no assurance that inflation will fall as seems to be generally assumed at least for now, nor how the rent cap will evolve;

·         It does seem unfair, if not regressive, that the rents we charge our tenants could be raised by a rate that is much higher than the percentage we can raise Council Tax on all of the homes in the Borough up to and including band H, and

·         Interestingly the government’s own rent formula has increased at CPI+1% for 2023/24 but does not take into account the rent increase cap.  This does risk some disparity between our current tenants and new ones as their rent falls below the formula.

With so many often competing factors, the rent increase to be recommended has been subject to a deal of discussion within the administration and at the LSAB, in O&S and privately among members.  The range of increase most focussed on has been between our original legacy default - 3%, and 5%.  This proposal, at 4%, is believed to be, on balance, fair and reasonable considering all of the factors, but we will still be listening to any contributions that may follow next before the vote.

Finally, the recommendation to delegate certain authority for work in the maintenance budget is considered beneficial for the delivery of the works identified.”

86.4     Cllr Merryweather concluded by thanking the Housing Co-Portfolio Holders, Cllrs Paul Rivers and Nick Palmer, the Finance Team and Housing Team for their hard work and diligence in developing the HRA Business Plan and Budget.

86.5     The Mayor opened the debate and invited Cllr Mulliner to respond. Cllr Mulliner indicated that the Conservative Group would be supporting the HRA budget, whilst noting that it was vitally important to communicate clearly the borrowing strategy and the impact of this. He also noted the discussion that had taken place regarding the proposed increase in housing rents, and whilst he felt that an argument could be made for a higher increase, he had no strong argument against what was being proposed.

86.6     Cllr Richard Seaborne spoke to add his support to the recommendations, but also to note the apparent contradiction between the Council’s net zero aspirations and the planned gas boiler replacement programme which was set out in the capital programme.

86.7     The Leader responded that the government target was to achieve EPC – C by 2050, but this was un-funded. The Council had written to the Minister on this point, but had received no response. The apparent contradiction was noted, but modern gas boilers were more efficient and emitted less carbon than those being replaced. The stock condition survey would not be starting from a zero base, but the council needed better information to inform the energy efficiency programme.

            Secretary’s note: at the Council meeting on 21 March 2023, the Leader advised that he had mis-spoken, and the government’s target date to achieve EPC-C was in fact 2035. The Mayor agreed that this correction be included in the Minutes.

86.8     In accordance with Procedure Rule 17.4, the Mayor called for a recorded vote on the recommendations which were taken en bloc.

86.9     The vote was carried, with 47 votes in favour, zero votes against and zero abstentions.

RESOLVED that:

1.    the rent level for Council dwellings be increased by up to 4% from the 22/23 level with effect from 1 April 2023 within the permitted guidelines contained within the Government’s rent setting policy;

2.    the service charges in senior living accommodation be increased by 4% per week from 1 April 2023 to £20.90;

3.    the recharge for energy costs in HRA properties be increased by 4% per week from 1 April 2023;

4.    the revised HRA Business Plan for 2023/24 to 2052/53 as set out in Annexe 1 be approved;

5.    the approval change for the fees and charges as set out in Annexe 4 is noted

6.    the Housing Revenue Account Capital Programmes as shown in Annexe 5 & Annexe 6 be approved; and,

7.            the financing of the capital programmes be approved in line with the resources shown in Annexe 7.

8.            to deliver the works identified in the maintenance budgets, authority be delegated to the Executive Head of Housing, in consultation with the s151 Officer and Co-Portfolio Holder for Housing, to procure and enter into contracts valued over £100,000 shown in Annexe 8

For (47)

Councillors Christine Baker, David Beaman, Dave Busby, Carole Cockburn, Steve Cosser, Martin D’Arcy, Jerome Davidson, Kevin Deanus, Simon Dear, Sally Dickson, Patricia Ellis, David Else, Jenny Else, Paul Follows, Mary Foryszewski, Maxine Gale, Michael Goodridge, Joan Heagin, Val Henry, George Hesse, Anna James, Jacquie Keen, Robert Knowles, Andy MacLeod, Penny Marriott, Peter Marriott, Michaela Martin, Peter Martin, Mark Merryweather, Kika Mirylees, Stephen Mulliner, David Munro, John Neale, Peter Nicholson, Nick Palmer, Ruth Reed, Paul Rivers, Penny Rivers, John Robini, Trevor Sadler, Richard Seaborne, Julian Spence, Liz Townsend, Philip Townsend, John Ward, Steve Williams, George Wilson

Against (0)

Abstentions (0)

Cllr Jerry Hyman returned to the Council Chamber.