Agenda item

Report of Senior Head of Community and Chief Finance Officer.

Scrutiny considered the report of the Senior Head of Community and Chief Finance Officer detailing the HRA budget proposals, rent levels, service charges and heating costs for 2015/16 and the HRA Capital Programme for 2014/17.

The committee was advised that from 1 April 2012 the way that the Council’s social housing was financed had changed and the HRA became self-financing.  Expenditure therefore needed to be supported from rental and other income.

HRA Revenue Budget – The 2015/16 budget had been prepared following the principles adopted within the HRA 30 year Business Plan and showed a surplus of (£296,130) which was due to a number of favourable factors detailed within the report.

Members noted that the HRA budget was performing better than expected in the 30 year business plan due to various initiatives to control expenditure, including a reduction in the management fee payable to EHL since the start of the plan and lower than anticipated interest rates. At the same time income earnings from rents and service charges had remained on target. This allowed some scope for some spending to be realigned, as summarised within the report.

Rent Levels – The Council had been following the Government’s guidance for rents for social housing since December 2001. Under the HRA self-financing settlement the government had assumed that rent convergence was achieved in 2015/16.   In May 2014, the Government issued new guidance setting out its policy on rents for social housing from April 2015.  The new guidance simplified the approach to setting the rent for each property. The Government recognised that some properties would not have reached their formula rent by April 2015 and recommended that rent only moves up to formula rent where the property was re-let following vacancy. Although most of the Council’s properties had reached convergence, the number of properties that still needed to reach convergence would reach convergence at a slower rate.

Members noted that compliance with new guidance was not compulsory.

Previously, rent setting above government convergence limits was discouraged by the ‘rent rebate subsidy limitation’ rule which made the HRA liable for the additional Housing Benefit payments generated by excess rents. Following the move to self-financing, the ‘limits’ rule was no longer relevant to local authorities.  In order to reduce the number of properties trying to reach their formula rent, members noted that Cabinet were asked to recommend that council rents were set at a higher level with an average increase of 2.28%.

Although the accelerated convergence proposed showed more of a weekly increase to 896 tenants, it did not suggest an increase over £3.00 per week to any of the Council’s tenants keeping the increase at an affordable level as shown in the profiling tables at Appendix 2 of the report. 

Service Charges – The committee was advised that for properties in shared blocks these charges cover common services such as communal heating, lighting, equipment maintenance contracts, cleaning and grounds maintenance. In Older Persons Sheltered Accommodation the charges additionally included On-Site Co-ordinators, Lifeline services, lift maintenance contracts, communal furniture and carpets maintenance and internal re-decorations. These costs should be charged separately from the rent in those properties to which they applied.  The HRA Business Plan assumed that service costs were fully recovered through service charges and were not included in rents. This principle had been applied for 2015/16.

This resulted in an average service charge increase of 2.31%. for general needs properties in blocks and for Older Persons Sheltered Accommodation the average service charge increase was 2.57%.

The report further covered Heating Costs for Older Persons Sheltered Accommodation, Water Charges and Garage Rents.

The Capital Programme as set out in Appendix 3 to the report had been prepared to meet the Council’s strategies, as adjusted to reflect the availability of resources. Total budgeted expenditure for 2015/16 was £9,668,512.  The major works element of the programme was in line with the asset management plan and the self-financing business plan model. Funding was from the Major Repairs Reserve.  Cabinet had agreed a total budget of £12.1m for the Housing and Economic Development Programme  out of the total allowance of £20m. 

Eastbourne Homes Management Fee - the Management Fee covered both Operational and Administration costs as well as cyclical maintenance.   The proposed Base Management Fee was recommended to remain at the 14/15 level of £6,714,000, however an additional £520,000 had been proposed (as per para 2.5 of the report) to meet the current pressure on the maintenance budget.

The fee of £140,000 to support the work of the HEDP team had also been amalgamated into the Management Fee. This was previously shown within the budget under Supervision and Management and had been reduced by £50,000 from 2014/15.  Therefore the total proposed fee for 2015/16 was £7,375,000.

The committee was advised that to formally agree the management fee Members would be asked to delegate this responsibility to the Chief Executive, in consultation with the Cabinet Portfolio Holders for Community Services and Financial Services and the Financial Services Manager.

The committee discussed the Housing Revenue borrowing cap, local investment and use of local labour agreements and requested further information on a housing scheme in Rodmill.  The Senior Head of Community agreed to provide further information following the meeting. 

The Chairman requested that a briefing be given to the next Scrutiny monthly meeting regarding opportunities to support local companies through investment and local labour agreements.

RESOLVED: That Scrutiny note:

(1) The HRA budget for 2015/16 and revised 2014/15 as set out in Appendix 1 to the report.

(2) That rents were set in line with the rent convergence target of 2016 set by Government resulting in an average increase of 2.28%.

(3) That service charges for general needs properties were increased by 2.31%,

(4) That the service charges for the Older Persons Sheltered Accommodation currently available for let were increased by 2.57%.

(5) That heating costs were set at a level designed to recover the estimated actual cost.

(6) That water charges were set at a level designed to recover the estimated cost of metered consumption.

(7) That garage rents were set to increase by 2.28% in line with the average increase in housing rent.

(8) To give delegated authority to the Chief Executive, in consultation with the Cabinet Portfolio holders for Community Services and Financial Services and the Financial Services Manager to finalise Eastbourne Homes’ Management Fee and Delivery Plan.

(9) The HRA Capital Programme as set out in Appendix 3 to the report.