The minutes for the previous meeting held on the 26 January 2023 are to follow.
Minutes:
The Chair informed the Board that the notes of the meeting held on the 26th of January 2023 were found to be inaccurate and these would be amended and circulated outside of the meeting.
Annalisa Howson (Housing Service Improvement Manager) went on to discuss the Matters Arising paper that had been circulated to Members by email prior to the meeting. This is a supplementary paper that responds to a number of issues raised in the previous meeting including careline costs, solar panels and senior living scheme additional information.
Councillor Keen enquired about the careline costs. Annalisa Howson informed her that the careline charge start from £19.70 per month but this due to increase with 2023/24 Budget in April 2023.
The Chair notified the Board that the 4% rent increase was passed through Council on the 21st of February 2023. He requested for the speech made by the Portfolio Holder for Finance, Mark Merryweather to be attached to the notes of this meeting.
Attached below is the speech made by the Portfolio for Housing, Mark Merryweather at the Full Council meeting held on the 21st of February 2023 RE: HRA Business Plan - Revenue Budget and Capital Programme 2023/24:
“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.”