Agenda item

(Director of Communities) To consider the attached report (FPM-008-2015/16).

The Director of Communities presented a report on the Housing Revenue Account (HRA) Financial Plan and future options resulting from the Government’s required rent reductions of 1% per annum by all social landlords for the next four years, as an alternative to the previous guidance of CPI+ 1% for rent increases. This had resulted in an estimated loss in rental income to the Council’s HRA of around £14million over the next four year period and around £228million over the next 30 years. In view of the significant reduction, the Director of Communities commissioned Simon Smith, the Council’s HRA Business Planning Consultant from CIH Consultancy to provide a report on the options available to the Council, to ensure that the HRA did not fall into deficit.

Mr Smith gave a presentation on the estimated loss in rental income to the Council’s HRA compared to the Council’s current HRA Financial Plan expectations and options available to the Council to consider, which were;

·         Ceasing all or some of the funding currently available within the Financial Plan for future housing improvements and service enhancements for HRA services;

·         Reducing investment in improvements to the Council’s housing stock (and reducing the Council’s Modern Home Standard accordingly);

·         Reducing/ceasing the Council’s own Housebuilding Programme;

·         Further borrowing for the HRA, repaid by the end of the Financial Plan period;

·         Combinations of the above.

Mr Smith advised that no immediate corrective action was required at present but that a further review of the HRA Financial Plan should be undertaken again in 2016, when further details were available and information about the Government’s requirements for local authorities to sell their “high value” void properties was known. It was also advised that with a few exceptions, most of the uncommitted funding within the HRA’s Housing Improvements and Service Enhancements Fund for 2016/17 was not spent at present.

The Cabinet Committee agreed with CIH Consultancy’s view that the details of the Housing Bill were required before decisions could be made on the future direction of the Financial Plan, because of the unknown details surrounding the Government’s  “High Value” void policy, which could result in a high proportion of the Council’s housing stock having to be sold on the open market. The Director of Communities advised that he understood that the CLG was currently considering the possibility of a financial levy being placed on local authorities rather than requiring them to sell specific “high value” voids. He commented that, if this was the outcome, it may be a better one for the Council, bearing in mind the high property values in the District, compared to the rest of the Region.

There was a discussion on whether or not the Council should continue with its Housebuilding Programme, in order to reduce, or avoid the need for additional borrowing. Mr Smith advised that if the Programme was reduced in the early years, not only would the Council have to pass money to the Government (estimated to be in the region of £7.329million), in addition, the return of such receipts would attract interest at a rate of 4% above base rate (0.5%), compounded from when they were originally received, estimated to be in the region of £1.034million. Councillor Stallan advised that a measured view would be required and that the Council should proceed with the Housebuilding Programme, as the details of the Government’s policy were still unknown. Councillor Whitbread stated that perhaps the Council should review it HRA’s programme, to reduce the borrowing requirements in future as well.

The Cabinet Committee discussed the options put forward to them and considered that the Council had a good standard of housing stock.

Councillor Whitbread pointed out that the Government’s requirements for social landlords to decrease their rents by 1% per annum was good for residents, even though it would require tough decisions for the Council in the future.

With regard to the exceptions to the proposed 1 year moratorium on spending from the Housing Improvements and Service Enhancements Fund, Councillor Stallan asked a that further exception be included within Recommendation 4, for £42,000 to be utilised, to enable the continued support of two Citizen Advice Bureau (CAB) Debt Advisors for one year, to provide support for residents to respond to the introduction of Universal Credit.

The Cabinet Committee commented on the previous requests made to the CAB, to provide information on the clarification of how the funding provided by the Council was being spent, together with the recent invitation given to the CAB to provide a detailed presentation on its work to Overview and Scrutiny. With regards to the CAB Debt Advisors, the Director of Communities advised that that CAB had provided advice in April 2015 to July 2015 to 209 people and that 164 people had received face to face advice.

Nevertheless the Cabinet Committee felt that it would be helpful if the CAB could  attend and give a presentation to the appropriate body of Overview and Scrutiny, together with details of how the funding that the Council had given had been spent, before further funding was given to extend the employment of the two Debt Advisors..

Resolved:

(1)        That the Government’s requirement that all social landlords reduce their rents by 1% per annum for the next four years and the estimated loss in rental income to the Council’s Housing Revenue Account (HRA) of around £14million over the next four years and around £228million over the next 30 years (compared to the Council’s current HRA Financial Plan expectations) be noted; 

(2)        That the resultant report from the Council’s HRA Business Planning Consultants, CIH Consultancy, on the options available to the Council to ensure that its HRA does not fall into deficit be noted;

(3)        That no immediate corrective action be taken at present and no decisions be made to re-cast the HRA Financial Plan until further information becomes available on the effect of the Government’s separate proposal to require local authorities to sell “high value” void properties;

(4)        That the £702,000 uncommitted funding within the HRA’s Housing Improvements and Service Enhancements Fund for 2016/17 not be spent at present, with the exception of:

(a)        £20,000 per annum being made available for a further 2 years (2016/17 and 2017/18) to fund Voluntary Action Epping Forest (VAEF) to continue to provide the successful Mow and Grow Scheme for older and disabled Council tenants;

(b)        £50,000 per annum continuing to be made available for the Housing Improvements and Service Enhancements In-Year Fund, to fund small improvements and enhancements identified during 2016/17, with the current approval arrangements applying; and

(c)        In principle, £42,000 to be used in 2016/17 to fund the Citizens Advice Bureau (CAB) to extend the employment of its two existing Debt Advisers for a further year, subject to:

(i)  The CAB Manager attending an appropriate meeting of the  Overview and Scrutiny, as previously requested by the Council, in order to explain the use and outcomes of all the Council’s grant funding to the CAB;  and

(ii)  The Cabinet Committee receive a further report, after the Overview and Scrutiny meeting, to consider whether or not the request for this additional grant funding should be approved.

(5)  That the £384,000 already accumulated and held within the Housing Improvements and Service Enhancement Fund’s Major Capital Projects Reserve be retained and made available for future HRA capital projects;

(6)  That the Cabinet Committee reviews the HRA Financial Plan again in 2016, and makes decisions for the future at that time, once the financial implications for the Council of the Government’s requirement for local authorities to sell “high value” void properties are known; and

(7)  That, in order to inform the review in 2016, a further Options Report be provided by the Council’s HRA Business Planning Consultants at that time, and that the Housing Select Committee and the Tenants and Leaseholders Federation be consulted for their views on the options, prior to consideration by the Cabinet Committee.

Reasons for Decisions:

The estimated rental loss to the HRA was significant, and the future strategy for the Council’s HRA Financial Plan needed to be reviewed, but this could wait for a further year, until more information was available on other external financial risks.

Other Options Considered and Rejected:

The main alternative options appeared to be:

·                     To select one of the options set out in the CIH Consultancy Report (or another option), re-cast the HRA Financial Plan now and action the resultant decisions required;

·                     To not place a moratorium on the use of the Housing Improvements and Service Enhancements Fund in 2016/17 and continue to invite the Housing Select Committee to propose how the resources currently allocated to the Fund within the HRA Financial Plan could be best utilised for 2016/17;

·                     To not utilise the Fund to make funding available for the Mow and Grow Scheme for the next two years and/or the In-Year Fund;

·                     To not retain the resources accumulated within the Fund for the Major Capital Projects Reserve; or

·                     To not consult the Housing Select Committee and/or the Tenants and Leaseholders Federation on the available options for the HRA Financial Plan, prior to reviewing them in 2016.