Subject:
Housing Revenue Account Budget & Capital Investment Programme
2023/24 and Medium-Term Financial Strategy
Date of meeting: 18 January 2023 Housing
Committee
9 February 2023 Policy & Resources Committee
23 February 2023 Budget Council
Report
of:
Chief Finance Officer
Executive Director for Housing, Neighbourhoods &
Communities
Contact Officer: Name: Craig
Garoghan
Martin Reid
Tel: 01273 29-1262
01273 29-3321
Email: craig.garoghan@brighton-hove.gov.uk
martin.reid@brighton-hove.gov.uk
Ward(s) affected: All
For general release
1.1
This report presents the
proposed Housing Revenue Account (HRA) revenue and capital budget
for 2023/24 as required by the Local Government & Housing Act
1989. Members are required to consider the revenue budget proposals
including investments and re-investments and changes to rents, fees
and charges and the capital programme. This report also sets out
the Medium-Term Financial Strategy and a 30-year financial
forecast.
1.2
The HRA contains the income and
expenditure relating to the council’s social landlord duties
covering approximately 11,700 rented properties and approximately
2,900 leasehold properties. The HRA is a ring-fenced account within
the General Fund that covers the management and maintenance of
council-owned housing stock. This must be in balance, meaning that
the authority must show in its financial planning that HRA income
meets expenditure and that the HRA is consequently
viable.
1.3
Although the HRA is not subject
to the same funding constraints as the General Fund, it is a
ring-fenced account within the General Fund and still follows the
principles of value for money and equally seeks to improve
efficiency and achieve cost economies wherever possible.
Benchmarking of both service quality and costs with comparator
organisations is used to identify opportunities for better economy,
efficiency, and service delivery.
1.4
For 2023/24 the position has
become considerably more challenging than previous years, due to
the continuing investment required from the building safety and
fire safety regulations, impacting capital and revenue budgets.
Including implications following the implementation of the Building
Safety Act and the Fire Safety Act. Both of which will have
implications from January 2023 and will require resource and
investment. It is likely to be 2023/24 before the Act comes fully
into force. In addition, significant investment is projected in
carbon reduction measures to achieve net zero and tackle fuel
poverty. The position is also being exacerbated by abnormally high
inflation impacting upon areas including services, labour,
materials and contracts.
1.5
The Chancellor’s Autumn
Statement announced in November that rent increases are to be
capped at 7% for 2023/24. This announcement provides a degree of
certainty allowing the council to balance affordability for tenants
whilst continuing the investment required in homes.
1.6
For expediency, included as
part of this report are the proposed fees and charges for 2023/24
relating to the Travellers sites in the city. These sites do not
form part of the HRA and so need to be considered separately to the
proposals for the HRA. Section 9 and Appendix 5 to the report
outline the proposals for the Travellers sites.
2
Recommendations
That the Housing Committee:
2.1
Approves a rent increase of up
to 7% in line with government legislation as detailed in paragraph
4.6 of the report.
2.1
2.2
Approves the service charges
and fees as detailed in Appendix 2 to the report.
2.3
Notes the Medium-Term Financial
Strategy and 30-year financial projections shown in Appendix 4 to
the report.
2.4
Approves the Travellers fees
and Charges set out in Appendix 5 to the report.
That Housing Committee approves and recommends to Policy
& Resources Committee:
2.5
That the updated HRA Revenue
Budget for 2023/24 as shown in section 4 of the main report and
Appendix 1 to the report be agreed and recommended to Full Council
for approval.
2.6
That the Capital Programme
Budget of £54.041m for 2023/24 be agreed and the 5-year
programme as set out in Appendix 3 to the report be noted, and
recommended to Full Council for approval; and
2.6
That Full Council:
2.7
Approves the updated HRA
Revenue Budget for 2023/24 as shown in section 4 of the main report
and Appendix 1 to the report.
2.8
Approves the Capital Programme
Budget of £54.041m for 2023/24 and notes the 5-year programme
as set out in Appendix 3 to the report.
3
HRA Budget Strategy and
Risks
3.1
The HRA Budget aims to balance
the priorities of both the council and council housing residents
within the context of the council’s Housing Strategy, HRA
Asset Management Strategy and the Housing Committee’s
priorities and work plan 2019-23 which set out the overall
direction for Housing in the city over the 4-year period. As well
as these commitments, the budget strategy anticipates the
significant legal and regulatory changes expected to follow from
the post Grenfell review of building safety through the Building
Safety Act and the proposals that will change how social landlords
operate as encompassed in the Social Housing White
Paper.
3.2
The priorities and work plan
for the Housing Committee and Housing Service for the four years
between 2019-2023 were agreed in September 2019 to inform future
reporting to Committee.
3.3
Key priorities of the Housing
Strategy, Asset Management Strategy and Work Plan that inform the
Housing Revenue Account Budget & Capital Investment Programme
2023/24 are:
·
Improving Housing Supply
·
Improving Housing Quality
·
Improving Housing Support
3.4
Further details relating to the
workplan and an update on progress to date can be found within the
Housing Committee Workplan Progress Update and Housing Performance
Report Quarter 2 2022/23, included within this Housing Committee
agenda.
3.5
Understanding the demands on
resources over the coming years is vital to ensure the HRA remains
a viable model. This will entail scenario planning, regular
reviews of the current budgets throughout the budget setting
process and early identification of financial pressures during the
given financial year. There are several areas that are yet to be
quantified creating risk and uncertainty for the HRA, this is
either due to further due diligence being required, the costs of
which have been included in the budget for 2023/24, or not enough
information being available on regulatory changes. These risks and
uncertainties include but are not limited to:
i.
Backlog recovery works:
Financial risks relating to the post-pandemic backlog of
responsive repairs and empty property works was identified as a
significant financial issue for 2022/23.This continues to be
recognised as a financial risk for the HRA during 2023/24. The
revenue budgets have been increased by the assumed inflation rates
set out in Appendix 1 to reflect some of the risk surrounding the
cost of these works. Due to the level of the backlog, it is
anticipated that costs during the financial year will exceed the
budget provisions allowed for, however, this is only anticipated to
be a short term impact whilst the backlog of works is cleared. The
2022/23 HRA budget report set aside a total of £1.500m to
ensure one-off funding was available during the year to cope with
this pressure. Due to underspends within the service during 2022/23
all of this funding is still available and will be used during
2023/24 to fund any cost overruns in-year.
ii.
Building Safety and Fire Safety Regulations:
It is anticipated that the investment required from the
building safety and fire safety regulations will be significant and
will impact capital and revenue budgets. The 2023/24 budget
proposals look to address this, including on the secondary
legislation required to implement the Building Safety Act following
Royal Assent in April 2022. It is likely to be 2023/24 before the
Act comes fully into force.
iii.
Social Housing White Paper:
There is significant uncertainty surrounding the impact of
the Social Housing White Paper, including potential new duties
placed on social housing landlords and a review of the Decent Homes
Standard. There are resources allowed for within the HRA to
review the impact of this legislation during 2023/24 to help inform
how to best deal with the implications.
iv.
Sustainability Investment:
It is recognised that Housing can play a significant part
in reducing the City’s carbon footprint and therefore
the climate crisis. Improved energy performance of homes is
addressed through investment in our planned and major works
programmes, including improvements to roofing, windows, doors,
external works, heating systems and solar PV’s. The total
proposed investment programme over 5 years including all the areas
investment listed is estimated to be £52.000m with the 2023/24
programme being £9.000m.
However, through the work being undertaken by the
council’s sustainability team and in identifying
opportunities to work collaboratively with neighboring authorities,
it is recognised that investment is likely to need to increase
beyond this level to ensure that the target of making the city
carbon neutral by 2030 is met, therefore creating risk and
uncertainty around future years’ investments. The likelihood
is this will increase the HRA’s capital programme and
borrowing requirements in the short term.
v.
Rent setting policy updates:
The outcome of the social rent consultation which concluded
on 6th October 2022 has provided clarity on the rent
uplift allowable for 2023/24. This has allowed the council to set
out a plan for the financial year to continue investing in
tenants’ homes, whilst limiting the increase to
individuals’ rents as much as possible. Beyond 2023/24 the
policy for rent setting becomes less certain for multiple reasons.
The first being that it is unclear if any further alterations to
the rent policy will be made for 2024/25; currently it is assumed
that the policy will revert to allow CPI+1%. The second reason is
that notwithstanding the cap on rent increases for 2023/24 the rent
policy allows for up to Consumer Price Index (CPI) at the previous
September rate +1% to be applied to rents over a 5 year period;
2024/25 would be the final year. Currently, it is unknown what the
rent policy will look like beyond this. Central Government have
indicated that further consultation is likely to happen during
2023/24.
3.6
All of the above makes
medium-term financial planning very challenging at a time when
budgets are under growing and sustained pressure due to inflation
and economic conditions. This is further demonstrated by the
current financial forecast for 2022/23 where the HRA is estimated
to overspend by £1.172m.
3.7
The HRA is having to manage the
rising cost of inflation, including costs of utilities and repairs
to tenants homes alongside increasing support for tenants. Work
also continues to address the rent loss and other costs associated
with the remaining back log of empty properties, albeit it is still
anticipated that this will exceed the budget set in February 2022.
The reported overspend also includes a short term pressure relating
to financing costs as a result of borrowing being undertaken early
than anticipated in order to take advantage of more favorable
interest rates.
3.8
Officers continue to review
expenditure in order to mitigate the forecast overspend as far as
possible. If this cannot be managed within budget, then the
overspend can be met from other HRA resources including reviewing
the revenue contribution to capital and reserves position as
outlined in the HRA budget report for 2022/23. Further details of
the forecast can be found in the TBM month 7 report, presented to
Policy & Resources Committee on 1st December
2022.
3.9
Where it has been identified
that there will be a budget pressure that will continue through
2023/24, budgets have been increased to reflect this. Including an
increase in financing costs which has resulted from borrowing
earlier than anticipated to take advantage of more favorable
interest rates. There is also additional budget allowed to reflect
the current level of empty council homes and income collection.
Since March 2020 empty council homes have increased and rent
collection rates have decreased. Significant progress has been made
during 2022/23 in reducing the number of empty council homes, from
a starting position of 251 at March 2022 to 143 homes at the end of
November. The downward trend is expected to continue during 2023/24
with the aim to be at the level of empty council homes
pre-pandemic. The rent collection rate stands at 94.52% at the end
of November 2022. Officers are working to review the reasons behind
this and develop a recovery plan to support bringing this back up
towards pre-pandemic rent collection levels.
3.10
Allowed for in the 2023/24
revenue budget is an increase in the bad debt provision, increase
in costs of emergency accommodation linked to the current policy
for Temporary Accommodation across the authority and in part to the
number of empty council homes held in the HRA and Council Tax
contributions. These are considered to be short term pressures and
will reduce throughout the MTFS period as the number of empty
council homes continue to reduce and the collection of income
improves during 2023/24.
4
HRA Revenue Budget proposals
2023/24
4.1
When setting the revenue
budgets for 2023/24, consideration of all known and quantifiable
changes has been considered. In some instances, this has been
managed by reallocating resources to reflect the change in service
need and demand.
4.2
Assumptions around cost
pressures are outlined in table 1 below, with further detail
provided in Appendix 1 to the main report. The rising cost of
inflation is having a significant impact on the budget particularly
for repairs and maintenance and utilities costs. In contrast to the
stable periods of inflation experienced for many years, the table
shows the substantial impact of the higher inflation, which is
expected to continue into 2023/24, albeit at a reducing level
compared with the current financial year.
|
Table
1 – 2023/24 Revenue Budget changes
|
2022/23
Adjusted budget
|
2023/24
Inflation
|
2023/24
Investments
|
2023/24
Other
Changes
|
2023/24 Original
Budget
|
2023/24
FTE
|
|
Expenditure
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
Housing
Investment & Asset Management
|
4,997
|
312
|
0
|
24
|
5,333
|
64.6
|
|
Housing
Management & Support
|
5,846
|
607
|
0
|
(77)
|
6,376
|
15.1
|
|
Housing
Strategy & Supply
|
1,515
|
51
|
0
|
(110)
|
1,456
|
37.6
|
|
Repairs
& Maintenance
|
14,112
|
990
|
1,146
|
(54)
|
16,194
|
201.4
|
|
Tenancy
Services
|
12,233
|
1,153
|
438
|
219
|
14,043
|
214.7
|
|
Revenue
Contribution to Capital
|
19,096
|
0
|
0
|
262
|
19,358
|
|
|
Capital
Financing Costs
|
5,865
|
0
|
0
|
489
|
6,354
|
|
|
Total
Expenditure
|
63,664
|
3,113
|
1,584
|
753
|
69,114
|
533.5
|
|
Income
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
Rents
Dwellings
|
(55,954)
|
(3,946)
|
0
|
(777)
|
(60,677)
|
|
|
Rents Car Parking
/ Garages
|
(1,000)
|
(119)
|
0
|
(17)
|
(1,136)
|
|
|
Commercial
Rents
|
(600)
|
0
|
0
|
0
|
(600)
|
|
|
Service
Charges
|
(5,924)
|
(396)
|
0
|
(92)
|
(6,412)
|
|
|
Other
Income
|
(186)
|
(3)
|
0
|
(100)
|
(289)
|
|
|
Total
Income
|
(63,664)
|
(4,464)
|
0
|
(986)
|
(69,114)
|
|
|
DEFICIT /
(SURPLUS)
|
0
|
(1,351)
|
1,584
|
(233)
|
0
|
|
4.3
The table includes a high level
summary of recurrent cost assumptions offset by the increase in
income predominantly from rental income for dwellings. The net
revenue budget results in a ‘surplus’ of £19.358m
which is then used to provide the Revenue Contribution to Capital
in support of capital programme investments.
4.4
However, this surplus is not
sufficient to meet the capital investment in existing homes during
2023/24 as outlined in Appendix 3 to this report. The impact of
this means that borrowing will be required to meet this level of
investment. The resources available to fund the capital programme
will be kept under review during the financial year and any
borrowing decision will be made in line with treasury advice. A
review of the HRA’s reserves and borrowing position will be
carried out on a regular basis and reported in accordance with the
council’s financial regulations and procedures.
Rents and Service Charges
4.5
Social rents for council homes
are calculated in accordance with government guidelines. Rent
restructuring rules still apply and Target Rents for each property
are calculated based on the relative property values, bedroom size
and local earnings, the Target Rents will apply to all new social
rent tenancies.
4.6
Affordable rents, which include
the council’s Living Wage rents and LHA rents, are calculated
differently to social rents. For Living Wage rents this means that
for any new tenancies and re-lets, rents are set using the new
national living wage hourly rate due to be introduced from
1st April 2023.
LHA rents are however capped at the lower of the LHA rate
or 80% of the market value. For new tenancies and re-lets an
assessment of the market value is undertaken at the time of letting to ensure the overall charge including service charges does
not exceed those limits. For 2023/24, LHA rates have been frozen at
the current rates. Further information on these rates can be found
on the
council’s
website.
4.7
The Autumn Statement announced
on 17 November 2022 that following consultation with stock holding
Local Authorities and Housing Associations rent increases will be
capped at 7% rather than allowing the potential 11.1% increase
allowed under the current rent policy statement. The impact of this
uplift has been factored into the budget proposals for 2023/24 and
included in the Medium-Term Financial Strategy (MTFS) which
inevitably results in less being available to directly fund capital
investment together with a concomitant increase in the borrowing
requirement. The table below provides the breakdown of the average
rent increase across the 4 rent levels included within the
HRA’s rent policy.
|
Table
3 - Average weekly rent increases
|
|
|
Rent
Type
|
No.
of tenancies
|
22/23
Average weekly rent
£
|
23/24
Estimated average weekly
rent
£
|
%
increase
|
|
Social
|
11,209
|
89.70
|
95.98
|
7.0%
|
|
Affordable
at 27.5% Living Wage
|
464
|
141.61
|
151.52
|
7.0%
|
|
Affordable
at 37.5% Living Wage
|
139
|
182.53
|
195.31
|
7.0%
|
|
Affordable
at LHA
|
206
|
184.65
|
184.65
|
0.0%
|
|
Affordable
at LHA TA
|
167
|
160.29
|
160.29
|
0.0%
|
|
|
|
|
|
|
4.8
It is important that when
comparing the average rent levels above consideration is given to
the mix of units within the specific rent categories. Table 4 below
provides a summary of mix of units within each
category.
|
Table
4 - Percentage of the number of bedrooms per rent type.
|
|
Rent
Type
|
0
Bed
|
1
Bed
|
2
bed
|
3
Bed
|
4
Bed
|
5
bed+
|
|
Social
|
5%
|
31%
|
38%
|
23%
|
2%
|
>1%
|
|
Affordable at 27.5% Living Wage
|
2%
|
2%
|
72%
|
24%
|
0%
|
0%
|
|
Affordable at 37.5% Living Wage
|
0%
|
12%
|
72%
|
10%
|
6%
|
1%
|
|
Affordable at LHA
|
0%
|
50%
|
34%
|
16%
|
0%
|
0%
|
|
Affordable at LHA TA
|
7%
|
69%
|
16%
|
7%
|
1%
|
0%
|
4.9
When setting the Affordable
rents and Living Wage rents for current tenancies, consideration is
given to the prevailing rates for Local Housing Allowance (LHA) and
the national living wage for the new financial year. This is
compared against the 7% increase to ensure they do not exceed the
permitted uplift.
4.10
Rents are not calculated to
include any service charges and only include charges associated
with the occupation of a dwelling, such as maintenance of the
building and general housing management services. Service charges
are therefore calculated to reflect additional services which may
not be provided to every tenant, or which may relate to communal
facilities rather than to a specific occupation of a house or flat.
Different tenants may receive different types of services
reflecting their housing circumstances. All current service charges
are reviewed annually to identify any service efficiencies which
can be offset against inflationary increases, to keep increases to
a minimum. The proposed fees and service charges for 2022/23 are
set out in Appendix 2.
4.11
The largest increase in service
charges relates to the cost of utilities. The expenditure inflation
is currently estimated to be up to 45%, although could increase
beyond this. To reduce the impact on tenants during the
cost-of-living crisis, a phased increase is being proposed. This
means an increase of 50% of the anticipated inflation rate will be
applied, with a view to increasing charges up to the full cost over
a period of time to ensure cost recovery but to help to mitigate
the impact on tenants in the short term. The full year budget
effect of phasing the increase is a reduction in income of
£0.317m for the HRA during 2023/24. A review of the charges,
which are impacted by utility costs, will be carried out during
2023/24 and changes applied where applicable.
4.12
In addition to the 2023/24
impact, it is estimated that a further £0.192m per annum is
not being recovered as a result of Service Charges having not kept
pace with inflation over a number of years. The review will need to
consider the impact of this as well as ensuring that tenants
continue to be supported throughout the cost-of-living crisis.
Having a review of costs during the year will allow time to review
the wider economic situation.
5
HRA Reserve
position
5.1
The projected level of HRA
reserves at 1st April 2023 and 31 March 2024 are shown in Appendix
1. A minimum reserve of £3.000m is recommended to meet general
legal and financial risks including higher than expected
inflationary pressures, cost overruns, legal challenges, and other
contingencies. After taking this into account, current estimates
mean that the level of usable reserves are estimated to be
£9.137m at 1st April 2023, of which £8.657m has been
earmarked for specific uses.
5.2
The remaining balance of
£0.480m is low in relation to identified risks but because of
the nature of the reserves, if funding were required urgently for
health & safety works then officers can recommend that reserves
are reviewed and their use switched subject to availability or, if
the works required are capital in nature, works could be funded by
borrowing or Revenue Contribution to Capital depending on the
in-year capital programme position. Changes to reserves require
Policy & Resources Committee approval.
5.3
The council’s Section 151
Chief Finance Officer has reviewed the level of reserves and
provisions in accordance with the requirements of Section 25 of the
Local Government Act 2003 and considers them to be adequate and
reasonable for their purpose.
5.4
Ongoing service reviews, and
consultation with tenants and residents identified in the Housing
Committee Work Plan, will continue to be undertaken in 2023/24 to
ensure that resources accounted for in the HRA budget are set
correctly, that Value for Money is being provided and that the
council is meeting the needs of its residents. Where it is deemed
that additional resources are required to further improve a
service, an individual business case will need to be developed.
Within the current resources, there is the flexibility to switch
resources where necessary whilst keeping core services running. Any
major changes in budget resources during the year will be reported
to Committee.
6
HRA Capital Programme
2023/24
6.1
The Housing Capital Programme
seeks to provide substantial investment in the council’s
housing stock and improve the quality of homes. The implementation
of the proposed programme will take account of all relevant best
practice guidelines and has been informed by the priorities agreed
in the current HRA Asset Management Strategy. The service is
currently finalising the draft HRA Asset Management Strategy
2023-27 ahead of resident consultation and Housing Committee
approval. The Programme also reflects the delivery of planned
maintenance, improvement programmes and major capital projects to
council housing informed by the recent stock condition survey and
ongoing surveys of the council’s housing stock.
6.2
Consideration has been given to
the projects outlined in the capital investment programme and the
impact of BCIS inflation rates on those. As tender packages are put
together for specific projects there is a risk that there will be
an increase in estimated budget costs, and this will need to be
carefully managed and reviewed during the financial year. This is
particularly prevalent for the major projects that are
planned.
6.3
Table 3 below outlines the
proposed capital investment programme between 2023/24 and 2027/28.
Highlights of the capital programme are provided below with a full
breakdown of the programmes in Appendix 3 to this
paper.
|
Table 5
– Five year capital programme summary
|
Total
Budget 2023/24
£'000
|
Provisional
Budget 2024/25
£'000
|
Provisional
Budget 2025/26
£'000
|
Provisional
Budget 2026/27
£'000
|
Provisional
Budget 2027/28
£'000
|
|
Investment in existing Housing Stock, including improving
overall quality of homes, incorporates general carbon reduction and
making homes more sustainable.
|
26,320
|
27,492
|
24,143
|
24,041
|
24,596
|
|
Investment in specific sustainability measures
|
5,140
|
5,810
|
7,480
|
5,772
|
5,911
|
|
Tackling Inequality
|
2,985
|
2,660
|
2,690
|
2,710
|
2,710
|
|
Supporting well-run services
|
250
|
250
|
100
|
100
|
100
|
|
Delivery of New Council Homes
|
45,047
|
18,029
|
6,900
|
2,650
|
-
|
|
Total Capital Investment
|
79,741
|
54,241
|
41,313
|
35,273
|
33,317
|
Investment in
existing Housing Stock
6.4
Undertaking a
programme of repairs to our existing housing stock is of prime
importance to ensure the fabric of the buildings are maintained
into the future. Our Asset Management Strategy has identified the
areas of work that will be undertaken as a five year future plan,
and this is being enhanced to beyond the five years to provide 10
and 15 year programmes. Housing Stock Surveyors will be undertaking
this area of work and will continually appraise and update stock
records. The planned programmes of work include roofs, doors,
windows and external repairs and decorations. Major capital
projects are more extensive and cover all elements of works and
will also consider energy saving elements.
Investment in sustainability measures
6.5
Helping residents to live in
well-insulated, efficiently heated, healthy homes addressing fuel
poverty issues remains a key long-term objective, which is
supported through the capital programme. The five year programme
sets out resources of £30.113m; an average investment of
£6.022m per annum. This includes investment in making
improvements to communal and domestic heating systems as well as
identifying opportunities to install energy efficient & low
carbon heating systems.
6.6
The council’s solar PV
programme continues to be implemented. Following a service
redesign, project management support is now in place to deliver the
solar PV programme, procurement of a new contract has begun and
should be in place Spring 2023. A 3 year programme is being planned
to deliver up to 1000 new systems, and budgets have been
re-profiled on this basis.
6.7
As well as these specific
programmes being in place, other areas of investment will
contribute to the energy efficiency rating of the council’s
housing stock. This includes work on replacement windows and doors
that will improve energy efficiency and warmth. The current
average SAP rating for Council homes is 73 (SAP ratings show the
energy performance of a property on a scale of 1 to 100). The
current average rating is equivalent to an Energy Performance
Certificate C. The focus of the capital expenditure on energy
efficiency, renewable energy and low carbon heating programmes will
be on the worst performing properties with the aim to get all
properties, where it is practicable, to a minimum of EPC C and
where feasible to EPC B.
6.8
The current SAP rating is a
reflection of the position across the whole of the council housing
stock and is based on a broader data set than we have previously
had available. We have also been able to update data to
reflect all the capital investments to council homes carried out
over the years to ensure these are reflected in the SAP score and
predicted EPC ratings, as opposed to relying on older and
potentially out of date SAP scores that do not reflect the current
position after all improvement works.
6.9
Future capital investments such
as planned window replacement programmes and major projects will
have a positive impact on the SAP rating for individual properties
and the overall stock average. We will work across teams to
anticipate and project these improvements for future reporting. The
main focus over the next few years will continue to be targeted at
the worst performing properties, EPC D and below. The current
average home is already at EPC C. We are aiming to bring all
properties ,where practicable, up to this minimum standard as soon
as possible.
6.10
In addition to the two areas of
investment outlined above the capital programme allows for
investment in
supporting people to live independently in their homes for longer
through housing adaptations, tackling overcrowding and adaptation
needs through our extensions and conversions programme, and
supporting environmental and communal area improvement work based on
resident priorities.
6.11
There is an identified need for
the council to have up to date Housing ICT systems required to
support and develop our investment programmes, regulatory
compliance, works and contractor management and customer service.
The medium term capital programme allows for this continued
investment.
Delivery of New Council Homes
6.12
Delivering new affordable
housing remains a key investment priority for the HRA and is
supported in the capital programme during 2023/24 and beyond.
Dedicated staffing resources to continue to deliver on this
priority are included in the revenue budget.
6.13
Delivering new council homes
under the Home Purchase Policy scheme remains a key source of
delivery for the HRA. The 2023/24 capital programme provides budget
of £15.000m for the purchase of up to 60 properties. This does
not include any slippage from the programme this year which is
estimated could be up to 20 homes taking the overall delivery
target to 80 homes during the year. Consideration has been given to
the rising cost of properties, which has been experienced
throughout 2022/23, and funding sources available. Delivering 60
homes is seen as a high but achievable target and allows for the
most efficient use of funding to be applied to the programme over
the medium term.
6.14
The number of homes purchased
is dependent on market conditions at the time of purchasing and so
the number of homes delivered is subject to change. At this time,
the assumptions made are considered to be the most
prudent.
6.15
Other delivery routes within
the capital programme include the Hidden Homes programme, where
work continues in utilising under-used spaces. As well as this,
work continues at pace on the two sites at Portslade and Coldean
that are being purchased from Homes for the City of Brighton &
Hove LLP and on various projects under the New Homes for
Neighbourhoods programme.
6.16
Only new build projects that
have received scheme and budget approval have been included in the
capital programme, this is a result of the need for an individual
business case for each project to be signed off. The inclusion of
any further budget would not be considered prudential or
sufficiently robust to support its inclusion without concrete
plans, with the detailed business cases needing full sign off from
Committee.
7
HRA Medium Term & 30 Year
Financial Forecasts
7
7.1
The introduction of
self-financing in 2012 provided additional resources from the
retention of all rental income and, through greater control
locally, enabled longer term planning to improve the management and
maintenance of council homes. The medium term and 30 year financial
forecasts are provided in Appendix 4 along with the assumptions and
risks identified for income and expenditure.
7.2
Since the update provided
through the 2022/23 budget setting paper the financial landscape
has changed significantly. The impact of high inflation and higher
than anticipated interest rates has changed the make-up of the 30
year financial forecast. This updated forecast shows that the net
income has reduced by £101m, whilst the capital investment
programme has increased by £84m (88% of which relates to
increased sustainability and retrofit investment) over the 30
years. As a result, the borrowing requirement has increased
significantly by £178m over the 30 years. It is therefore
vital that the HRA’s costs are kept under review with
efficiencies and savings identified early to ensure the HRA remains
viable in the long term. This is particularly important when
considering the investment that is likely to be required following
the Building Safety Act, Fire Safety Act and the outcomes of the
Social Housing White Paper.
8.1
The budget process allows all
parties to engage in the scrutiny of budget proposals and put
forward viable alternative budget proposals to Budget Council on 23
February 2023. Budget Council can debate both the proposals
recommended by Policy & Resources Committee at the same time as
any viable alternative proposals.
8.2
The government annually sets a
limit rent, currently capped at 7%, which is used to determine how
much Housing Benefit subsidy is received from the Department for
Work and Pensions. Rises above the limit rent would reduce the
amount of subsidy receivable by the council.
9
Travellers Fees and
Charges
9.1
The council’s travellers
site has 12 permanent pitches and 21 transit site pitches. As part
of the budget setting process, services are required to agree
changes to fees and charges through the relevant Service Committee.
The management of fees and charges is fundamental both to the
financial performance of the City Council and the achievement of
the Council’s corporate priorities. The council’s
Corporate Fees & Charges Policy requires that all fees and
charges are reviewed at least annually and should normally be
increased in line with the cost of providing the service to
maintain income in proportion to the net cost of
service.
9.2
The Corporate Fees &
Charges Policy also stipulates that increases above or below a
‘corporately applied rate of inflation’ should be
approved by committee. However, it should be noted that the
corporate rate of inflation (3%) is not a default rate of increase
and is a planning assumption only, set early in the financial year,
and should not therefore determine actual increases which should
normally reflect current inflation rates and cost increases to
ensure that income is maintained in proportion to
expenditure.
9.3
The committee are advised that
if the proposed fees & charges recommended in this report for
the Travellers service (a General Fund service) are not agreed, or
if the committee wishes to amend the recommendations, then the item
will normally need to be referred to the Policy & Resources
Committee meeting on 9 February 2023 to be considered as part of
the overall 2023/24 budget proposals. This is because the 2023/24
draft and final budget proposals are developed on the assumption
that fees and charges are agreed as recommended and any failure to
agree, or a proposal to agree different fees and charges, may have
an impact on the overall budget proposals, which means it would
need to be dealt with by Policy & Resources Committee as per
the requirements of the constitution. However, this does not fetter
the committee’s ability to make alternative recommendations
to Policy & Resources Committee.
9.4
The maximum increase that can
be applied to Traveller pitch fees is based on RPI as per the
Mobile Homes Act 1983. However, given the exceptionally high level
of inflation currently (September 2022 12.6%), the proposed pitch
increases are in line with those of the rent increases for Council
Housing tenants, an increase of 7%.
10
Community engagement and
consultation
10.1
The council is committed to
ensuring tenants and leaseholders are engaged in the HRA budget
setting process ahead of Committee decision making on the
budget.
10.2
A Housing Budget Update
workshop was held at the tenant and leaseholder City-Wide
Conference on 8th October. This included a presentation, giving an
outline of the current HRA budget and an initial high-level view of
2022/23 budget setting, budget pressures, service improvements, and
efficiencies and savings.
10.3
A further budget presentation
was shared at Housing Area Panels in week commencing 12th December
2022. This included the information shared at the City Wide
Conference with an update on the outcome of the Government’s
Rent Cap consultation, utilities inflation and proposed increases
in planned capital spend.
11
Conclusion
11.1
The Local Government and
Housing Act 1989 requires each local authority to formulate
proposals relating to income from rent and charges, expenditure on
repairs, maintenance, supervision and management, capital
expenditure and any other prescribed matters in respect of the HRA.
In formulating these proposals using best estimates and
assumptions, the Authority must set a balanced account. This budget
report provides a capital programme, break-even revenue budget and
recommends rent proposals in line with current government
guidance.
11.2
This report also provides the
latest medium and long term forecasts for the HRA. However, there
are several uncertainties due to impending government legislation,
which mean that the current forecasts should be treated with
caution.
12
Financial
implications
12.1
The financial implications are
contained within the main body of the report.
12.1
Finance officer consulted: Craig Garoghan Date
consulted: 09/01/2023
13.1
Under the Local Government and
Housing Act 1989, the Council is obliged to maintain a separate HRA
(Section 74) and by Section 76 must prevent a debit balance on that
account. Rents and other charges must therefore be set to avoid
such a debit. Section 24 of the Housing Act 1985 provides that a
local authority may make such reasonable charges as they determine
for the tenancy or occupation of their houses. The Council must
review rents from time to time and make such charges as
circumstances require. The council’s standard secure tenancy
agreement provides for tenants to be given “at least four
weeks’ notice in writing” of any increase in rents and
other charges before any increases are implemented. Approval
of the 7% increase in rents at January’s Housing Committee
will allow sufficient time for notice of any increase in rent and
other charges to be given.
13.2
In its role as landlord, the
council has contractual obligations to its tenants and leaseholders
to maintain the structure of its housing stock. These obligations
are complemented by statutory duties in the Landlord and Tenant Act
1985 as amended. The council must comply with other statutory
regimes, including those relating to health and safety, legionella
and fire safety. The measures outlined in the report will
assist the council in discharging those duties.
13.3
The Housing Committee has
delegated powers in relation to authorised sites and encampments,
so is the appropriate committee to agree increased Traveller fees
and charges set out in Appendix 5.
Lawyer consulted: Liz Woodley Date
consulted 22/12/2022
14
Equalities
implications
14.1
The HRA budget funds services
for people with a range of needs including those related to age,
vulnerability or health. All capital programme projects undertaken
include full consideration of various equality issues and
specifically the implications of the Equality Act. To ensure that
the equality impact of budget proposals is fully considered as part
of the decision making process, equality impact assessments have
been developed on specific areas where required.
15
Sustainability
implications
The sustainability implications are contained within the
main body of the report.
Supporting Documentation
Appendices
1.
Appendix 1 – 2023/24 HRA Revenue Budget
2.
Appendix 2 – 2023/24 Tenant Service
Charges
3.
Appendix 3 – HRA Capital Programme 2023/24 –
2027/28
4.
Appendix 4 – HRA Medium Term Financial Strategy and
30 Year Financial Forecast
5.
Appendix 5 - Travellers fees and Charges.