Agenda item

This report provides an update on the HRA Business Plan projections. The HRA Business Plan forecasts income, expenditure, investment and borrowing requirements in respect of the council’s housing stock over a 30-year period.

          The Chair welcomed Mr Glenn Smith, Director at Housing finance Associates and invited the Group Head of Housing, Wellbeing and Communities to present his report.  He advised members that the Housing Revenue Account Business Plan (HRABP) update had previously been refreshed during  January 2023.  He drew attention to a new figure against peek debt levels.  The previous HRABP had contained limited investment for major works and decarbonisation.  Since then representative levels have been included of £50k per property for works and 25k per property for decarbonisation works.  This money had been included as a direct result of actions taken by officers to prioritise restoring the HRA to a sustainable financial position and to avoid the real threat of it falling into a financial deficit position. It was noted that all Councils managing a housing stock were experiencing the same financial issues as a result of additional regulatory burdens.   Since the Covid 19 pandemic, the Council had faced increases in building costs and interest rates, as well as the positive impact of the extended Housing Rent Settlement received now built into the Plan.

He advised that a number of assumptions had been made in drafting the Plan, set out in paragraph 4.1.  The Baseline Revenue forecast at paragraph 4.2 showed the HRA balance levels returning to minimum levels during 2026-2027.  Whereas the previous reiteration showed balances below the minimum level for seven years to 2030-2031.  This was mainly due to actions taken since January 2024, in particular the insourcing of the housing repair service, service charge de-pooling to increase revenue, as well as a programme of savings and efficiencies on Supervision and Management at 2% per year over the next five years.  The Baseline Capital programme at paragraph 4.3 will be subject to change as viable schemes were brought forward.  The Baseline Capital financing at paragraph 4.4, showed that borrowing will increase during 2028 and 2029 based on current assumptions and could change considerably once the stock condition survey data analysis had been completed.  He referred to the actions taken during this year to deliver a net surplus, combined with the five-year rent settlement and the medium-term cost reduction programme, would result in a drop in interest cover below the minimum indicator during 2044-2045.  It was therefore assumed that borrowing was broadly affordable until 2050.  It was critical that officers continued to take action to improve operating margins by reducing costs and maximising revenue. 

 Whilst there was still some way to go to improve the HRA, which had been systematically reduced over the previous three years, heconsidered that the HRABP refresh was a positive step.  Increased investment had been built in at representative levels because of the actions taken.  The savings built over the next five years and the savings from the insourcing of the repairs service would need to be banked.  The HRABP would require a refresh on a 6-monthly basis, returning to annual reporting to this Committee.

Mr Glenn Smith from Housing Finance Associates Ltd was invited to address the Committee who then talked members through the graphs set out in the report.

The Chair invited members to make comment or ask any questions, which were responded to by officers:

·     Clarification was sought concerning paragraph 4.7.3 of the Baseline summary and the disposal of assets.  Mr Glenn Smith explained that the Capital budget was not ringfenced and so technically the Council could use its capital receipts to dispose of a corporate asset and use that capital receipt to partly pay into the HRA capital programme or to repay HRA debt.  The Group Head of Finance and Section 151 Officer added that currently the Council did not have many capital receipts and did have a growing capital programme.  However, the Asset Review Programme Board could identify further sources of capital receipts but there was a need to be careful about over utilising it.

·     Further information was requested regarding the Interest Cover ratio graph on page 20 and the peak during 2030.  It was explained that the modelling allowed for rent increases in line with the CPI index plus 1% until 2033-2031.  The modelling showed that from that point onwards rents would increase in line with CPI only and that in later years costs would increase faster than rental income.

·     It was suggested that if the Council brought its own stock at an interest only rate this would be cheaper than putting residents in bed and breakfast accommodation. A number of developers were finding it difficult to find a social housing association to take on their social housing, which could have an effect on the future numbers being built and was this something that the Council had considered taking on instead? The Group Head of Housing, Wellbeing and Communities undertook to respond outside of the meeting but provided assurance that officers were doing everything they could to increase the housing stock to reduce the burden of nightly paid accommodation and advised that there were plans in place to take this matter forward.

·     Although it was understood why there was borrowing against the HRA it was a concern.  A suggestion was made that any variations to those currently planned should be brought to this Committee for consideration.  It was advised that the previous HRABP had not included much investment in the stock necessitated by the circumstances the HRA found itself in at the time.  The work carried out to bring the HRA’s balance back into the required minimum levels meant that there were a number of options to do this. The assumptions in the HRABP options would change over a period of time and the capital projects would come forward for consideration by the Committee.  Whilst he understood the concerns raised about borrowing, he urged members to look at the imperatives concerning asset investment in maintaining the value of the stock.

·     The Group Head of Finance and Section 151 Officer referred to the graph at paragraph 4.6.1 should provide some assurance to members that the Council had very good cover for interest payments.  It should be noted that the report makes no investment or borrowing decisions.  A safeguard was in place to address the concerns surrounding borrowing. 

·     With regards to Decarbonisation projects and recent speculation of a slow down on the national and international slowdown of the programme, have officers considered revising the Council’s own programme?  The outcome of the Warm Homes funding bid was awaited with the intention being to continue to run the programme for the next three financial years in accordance with the programme submitted as part of the bid.   The Committee would continue to receive updates on progress. 

·     An update on the timescale for the outcome of the housing stock condition survey and how would be communicated to the Committee was requested.  It was advised that the data would be analysed and a one-year programme of work would be produced, aligned to the 2025-2026 budget.  By September 2025 an Asset Development strategy would be developed with a five-year programme for consideration by the Committee.

·     A member congratulated officers on the improvements to the Housing Service concerning improvements to the quality of service and response rates following resident feedback.  The Group Head of Housing, Wellbeing and Communities undertook to pass on the members comments  to the officers involved.

·     A comment was made that in terms of accountability a period of one-year was too long for the HRABP to come back to the Committee.  In terms of ultimate accountability of the HRA, this sat with Full Council.  The individual work undertaken by the Housing Service was the responsibility of this Committee.  He explained the reason that the Committee did not receive a report during 2024, was that having recently taken up his position at that time he was not able to bring a credible report to this Committee at that time.  However, since January 2024 he had worked with the Finance Service to develop service and financial initiatives as well as working with Mr Glenn Smith to work through and model the forecasts.  If members were to have credible updates and genuine influence and accountability then an annual report was the best way forward. A member having had assurances before hoped they would be more fruitful this time.

·     The Group Head of Housing, Wellbeing and Communities responded to a question concerning the Government’s plans for local government reorganisation.  The most significant impact if the Council formed a Unitary with another Council with its own HRA was that the Unitary could only run one HRA account.    

·     In response to  question concerning Sheltered Housing, the Group Head of Housing, Wellbeing and Communities advised this was a separate piece of work with capital expenditure programmed over the next two-years that would not start until a report is brought the Committee with a scheme.

·     The Group Head of Finance and Section 151 Officer responding to a question advised that The borrowing limits formed part of the Treasury Management Strategy report, which was due to be considered by the Audit and Governance Committee on 24 February 2025.

The Committee noted the report.