Agenda item

Councillor Lesley Kelly, Cabinet Member for Housing & Public Protection, introduced the report

The report presented information about the current Housing Revenue Account Subsidy system, and the proposals that were due to be implemented in April 2012 to reform the Housing Revenue Account system.

The report demonstrated how the proposed new system was currently projected to require Havering Council to take on estimated additional housing debt of £160m, which would mean that the Council’s total housing debt would be £203m. These estimates were subject to changes before the final figures are known in January 2012. 

It was explained that the Council would have to manage this debt and deliver stock investment over a 30 year HRA Business Plan. The initial baseline HRA Business Plan model showed that this was achievable as long as the Decent Homes funding allocated in February 2011 remained in place.

It was proposed that there be an annual review of the HRA Business Plan figures in order to ensure that the assumptions about expenditure, income and the repayment of debt were sound and had no adverse impact on Council tenants or Council Tax payers.

Reasons for the decision:

The current system of Housing Revenue Account Subsidy was not fit for purpose.  It currently re-distributed resources on an annual basis from local authorities who had little debt, to those who had accumulated a great deal of debt.  The defects of the system had been known for a long time, and criticised in several reports since the Audit Commission Report of 2005.  The current system did not allow for local accountability, local decision making or local control of rents, investment or business planning.

Other options considered:

Clearly as the proposed new system was being imposed through legislation, the London Borough of Havering had no option now but to adopt and adapt to the new system. Whilst the system brought independence and responsibility, it also brought significant risks to the management of the housing debt. The report proposed that there should be an annual review of the HRA Business Plan so that the accuracy of all the underlying assumptions could be tested; and appropriate adjustments made in order to fulfil the twin objectives, of bringing the council housing stock up to a decent standard, as well as ensuring that the income, expenditure and debt were all managed in a prudent manner.

The Council could decide to borrow up to the maximum borrowing cap at the outset, however, this option had not being followed with, instead, the case for using the additional borrowing facility to meet some of the Council’s other housing investment pressures being kept under constant review.

Cabinet AGREED:

1.                  To note the changes in the Reform of Council Housing proposals that have occurred since the subject was last considered in June 2010.

2.                  To approve the baseline HRA Business Plan model – included in Appendix 2 of the report – for the management of the Council Housing stock over the next 30 years, and the assumptions which were included in it.

3.                  To note that the Council’s Treasury Strategy will be reviewed, and that there is a report to this end, elsewhere on the agenda.

4.                  To commit to carrying out an annual review of the HRA Business Plan, in order to ensure that the objectives of maintaining the condition of the Council’s housing stock and meeting the Council’s financial obligations are fulfilled.

5.                  To approve the application of a ‘mortgageable’ standard for its stock in addition the Decent Homes standard for the purposes of HRA business planning.

6.                  To commit to review, no less frequently than annually, which, if any, of the Council’s housing stock investment pressures should be met from additional borrowing up to the maximum borrowing cap.

7.                  That should the number of sales of council homes under the Right to Buy rise above the 13 assumed in the baseline HRA Business Plan model, the policy of not applying Right to Buy receipts to pay off the debt associated with those properties will be reviewed.

8.         To refer the baseline HRA Business Plan model to full Council for approval.