Agenda item

Report of Senior Head of Community and Deputy Chief Executive and Chief Finance Officer.

Cabinet lead members:  Councillors Alan Shuttleworth and Gill Mattock.

Full council, at meeting on 17 February 2016, recommended to approve:

(a) HRA budget 2016/17 and revised 2015/16, as set out in appendix 1 to report;

(b) social and affordable rents decreased by 1% in line with change in government policy;

(d) service charges for general needs properties increased by 1.06%;

(e) service charges for older persons’ sheltered accommodation decreased by 7.14% to reflect a reduction in actual costs as well as notification of a reduction in heating and water costs;

(f) heating costs set at a level designed to recover estimated actual cost;

(g) water charges set at a level designed to recover estimated cost of metered consumption;

(e) garage rents increased in line with RPI (as at September 2015) plus 1% at an average increase of 1.8%;

(f) scheme to move new garage tenancies to market rent values for 2017/18 financial year to be examined;

(g) delegated authority granted to senior head of community, in consultation with the lead cabinet members for community services and finance and the chief finance officer to finalise Eastbourne Homes’ management fee and delivery plan; and

(i) HRA capital programme as set out in appendix 2 to report.

63.1 Cabinet considered the report of the senior head of community and chief finance officer in respect of the rents, service charges and heating costs to be set for all of the council’s housing tenants.  The report outlined the revenue account budget proposals for 2016/17 and housing capital programme 2015/19 and arrangements for agreeing Eastbourne Homes Limited’s (EHL) management fee and delivery plan.

63.2 From 1 April 2012 the way that council social housing was financed had been changed and the HRA had become self financing.  This meant that expenditure had to be entirely supported from rental and other income. The main tool for the future financial management of the HRA was the 30-year business plan which had been approved by cabinet on 8February 2012.  A report had been submitted to the December cabinet meeting outlining the implications of the changes being introduced in the Housing and Planning and the Welfare Reform and Work Bills. Work is ongoing on updating the HRA 30-year business plan so that a long term sustainable plan could be set.  The proposals included in this report were based on this ongoing work. The report reflected the recommendations made by EHL in relation to the increases in rent levels, service and other charges. 

63.3 The HRA revenue budget (appendix 1 to the report) had been produced based on the policies set out in the HRA 30-year business plan and showed an overall surplus of £293,000 for 2016/17. The budget was performing better than expected due to various initiatives to control expenditure, including a reduction in the management fee payable to EHL, lower than anticipated interest rates, and efficiencies achieved through the council’s restructuring programme: Future Model 2.  The reduction on income earnings from rents and service charges were in line with the updated business plan.  The plan provided for a contribution into the housing regeneration and investment reserve of £784,000 for 2015/16 and £924,200 for 2016/17 to meet future major works demands and other strategic housing related outcomes.

63.4 The HRA debt outstanding at 31 March 2015 was £40.3m, rising to £43.0m by 31 March 2018, the majority of which would be external debt and at fixed interest rates.  The increase in borrowing was expected to be undertaken to support the housing and economic development programme (HEDP) programme.  Under the self-financing settlement the government set a cap on total HRA borrowing of £42.96m, additional borrowing permission was given for £322,400 during 2014/15 and 2015/16 increasing the cap to £43.3m. The original 30-year business plan had assumed that from 2016/17 to 2028/29 an average debt repayment of £2.8m per annum would be funded from the HRA.  This was no longer viable due the rent decrease and other government housing initiatives, however, if possible when opportunities arose consideration would be given to using any surplus funds for the repayment of debt or to be used to reinvest in housing properties in lieu of new borrowing.

63.5 The HRA outturn for 2015/16 was expected to deliver a £399,000 surplus, a positive variance of £104,000 over the original budget.  This was mainly as a result of the decrease in the take up of the under occupation scheme and a reduction in the provision required for bad debts.

63.6 The government’s summer budget review had announced that rents on social housing properties would be reduced by 1% a year for each of the four years from 2016/17. 

63.7 For properties in shared blocks these charges covered 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, lift maintenance contracts, communal furniture and carpets maintenance and internal redecorations.  These costs were charged separately from the rent.  For general needs properties in blocks the proposed average service charge increase was 1.06% to ensure that costs relating to communal areas are fully recovered.

63.8 Service charges for older persons sheltered accommodation would be subject to a further review dependent on the outcome of the East Sussex County Council decision in February regarding a proposal to withdraw Supporting People funding from sheltered housing in East Sussex.  If funding was withdrawn, this was likely to come into effect from May 2016.  EHL was consulting with residents on the impact of withdrawal of funding and meetings would be held at all schemes during February 2016.  Any recommendations for any further change to the service charge as a result of the consultation would come to Cabinet in March 2016 for consideration.  Until further recommendations were made, the average decrease would be 7.14% to ensure that charges reflected expenditure.  Heating costs for older persons sheltered accommodation were set in line with known price decreases predicted by the Department of Energy and Climate Control.  An average decrease of 0.85% (equivalent to 6p per week) was recommended.  Water charges were also set in this way and the average charge decrease would be 0.81% (or 37p per week).

63.9 Following the previous year’s rent increases, garage void debt was slowly increasing and the number of garage voids had started to increase.  In order to ensure that garage rents were fully self-sufficient, an increase by CPI plus 1% would result in covering the costs of day to day repairs but the major works would still not be covered.  It was therefore recommended that garage rents be increased in line with RPI (as at September 2015) plus 1% at an average increase of 1.8% and a scheme to move new garage tenancies to market rent values for the 2017/18 financial year be examined.

63.10 Total budgeted expenditure on the HRA capital programme was planned at £7,712,285 for 2016/17.  The major works element of the programme was in line with the asset management plan and the self financing business plan model with funding from the major repairs reserve.  Cabinet had previously agreed a total budget of £14.4m for the housing and economic development programme (HEDP) out of the total allowance of £20m; this had now been profiled to reflect the expected spending timetable and will be funded from borrowing and Housing and Communities Agency (HCA) grant.

63.11 The EHL management fee covered both operational and administration costs as well as cyclical maintenance.  The fee for 2015/16 had been set at £7,375,000. EHL had proposed a reduction of £55,500 to reflect the efficiency savings achieved following the implementation of the Future Model structure and processes less an allowance for the changes expected from the supporting people funding.  The proposed fee for 2016/17 was therefore £7,319,500.

63.12 The council was obliged to ensure that all tenants were given 28 days notice of any changes to their tenancy including changes to the rent they pay.  In addition the information in the report would be sent to the tenant area panels following this meeting.

*63.13 Resolved (budget and policy framework): That full council, at their meeting on 17 February 2016, be recommended to approve the following:

(a) The HRA budget 2016/17 and revised 2015/16, as set out in appendix 1 to the report;

(b) that social and affordable rents be decreased by 1% in line with the change in government policy;

(d) that service charges for general needs properties are increased by 1.06%;

(e) that service charges for older persons’ sheltered accommodation are decreased by 7.14% to reflect a reduction in actual costs as well as notification of a reduction in heating and water costs;

(f) that heating costs are set at a level designed to recover the estimated actual cost;

(g) that water charges are set at a level designed to recover the estimated cost of metered consumption;

(e) that garage rents are increased in line with RPI (as at September 2015) plus 1% at an average increase of 1.8%;

(f) a scheme to move new garage tenancies to market rent values for the 2017/18 financial year is examined;

(g) that delegated authority be granted to the senior head of community, in consultation with the lead cabinet members for community services and finance and the chief finance officer to finalise Eastbourne Homes’ management fee and delivery plan; and

(i) the HRA capital programme as set out in appendix 2 to the report.