Agenda item

HRA Budget for 2016/2017 and HRA Major Works Capital Programme 2016/17 - 2018/19

Decision:

Cabinet:

1. Approved the Housing Revenue Account Budget as detailed in Appendix 1 of the report.

2. Agreed that the average rents chargeable for tenants in general needs Council properties owned by the London Borough of Havering be decreased by 1% from the w/c 4 April 2016 in line with the indicative figures contained in paragraph 2.1.6 of the report.

3. Agreed that the average rents chargeable for tenants in supported housing Council properties, such as sheltered housing and hostels, owned by the London Borough of Havering, be increased by 0.9% from the w/c 4 April 2016 in line with the indicative figures contained in paragraph 2.1.6 and 2.1.7 of the report.

4. Delegated agreement of the exact amounts chargeable to the Cabinet Member for Housing and the Deputy Chief Executive - Communities and Resources, following publication by Government of the rent calculation formula.

5. Confirmed the four rent-free weeks for 2016/17 as being: w/c 22 August 2016, the two weeks commencing 19 and 26 December 2016, and the week commencing 27 March 2017.

6. Confirmed that service charges and heating and hot water charges for 2016/17 would remain the same as in 2015/16 as detailed in paragraph 2.2.2 of the report.

7. Confirmed that the service charge for homeless households accommodated in the Council’s hostels should remain unchanged for 2016/17 as detailed in paragraph 2.2.3 of the report.

8. Confirmed that charges for garages should remain unchanged for 2016/17 as detailed in paragraph 2.3.1 of the report.

9. Confirmed that the service charge for the provision of security and support in sheltered housing (first introduced in 2015/16) should remain unchanged for 2016/17 as detailed in paragraph 2.4.1 of the report.

10. Confirmed that the Careline support charge would remain unchanged for 2016/17 as detailed in paragraph 2.5.1 of the report.

11. Confirmed that the Telecare support charges should remain unchanged for 2016/17 as detailed in paragraph 2.5.1 of the report.

12 Confirmed that the £0.5m identified in the budget for 2015/16to fund the replacement of the Housing Management system would be carried forward to 2016/17.

13 Agreed the HRA Major Works Capital Programme, detailed in Appendix 2 of this report and referred it to full Council for final ratification.

14 Delegated authority to agree individual environmental improvement works in the Capital Programme to the Cabinet Member for Housing and the Deputy Chief Executive of Communities and Resources following recommendation from the Head of Housing Services and the identification of appropriate funding.

15 Agreed that a further report should be presented to Cabinet in September 2016 with an amended HRA Business Plan.

Minutes:

Councillor Damian White, Cabinet member for Housing, introduced the report

Cabinet was informed that the report set a budget for the Council’s Housing Revenue Account (HRA) and HRA Major Works Programme and that it also provided an update to the 10 year HRA Business Plan.

The HRA remained a ring-fenced account that was used to manage the Council’s own housing stock. The proposed budget would enable the Council to manage the stock to a reasonable standard and to maintain the stock to the Decent Homes standard. It further set rents, service charges and other charges for Council tenants for the year 2016/17.

It was drawn to Members attention that in the HRA rent-setting report for the previous year the following paragraph had explained the rent-setting strategy for 2015/16 onwards and the rules that applied at that time on which Local Authorities had built their HRA business plans:

“The Housing Revenue Account is sound and is able to invest in its stock, and develop new homes over the coming three years. However, due to a recent change in the Government’s rules on rent increases, the former system of rent restructuring is being abolished in 2015/16 and future rent increases are designed to be limited to no more than the Consumer Price Index (CPI) + 1%. The Council plans to move to the new system in 2016/17, but has to take the opportunity which remains in this year, to move its rents to target rents immediately. This will remove the inequality between properties that currently exists. At present it is possible for identical properties to have different rents, because of the transitional nature of the rent restructuring plan. By moving immediately, in one year, to target rents, this inequality will be eliminated. All rents will be at target rents; additional rental income will be available to invest in the housing stock, and in new homes, and future rent increase for the next 10 years will be in line with inflation pressures as expressed by the CPI. In addition, if the Council did not move its rents to target rents, this opportunity would be lost and a regime of CPI + 1%, if applied immediately would have lost the Council’s Business Plan £100m over the life of the Plan.”

Despite this level of rent increase, Havering’s rents remained in the lowest quartile in London during the year 2015/16.

Cabinet was reminded that after the General Election in May 2015, the new Government had made various financial decisions that were focussed on maintaining the austerity measures to reduce the public sector borrowing figures and, in particular, to reduce welfare benefits expenditure. In June 2015 the Government had announced that, in order to help reduce welfare benefit expenditure by £1.45bn it was changing the way social housing rents were to be charged. Government announced that rather than allowing any increase - as stated in the paragraph above - social housing rents would be reduced by 1% per year for the four years from 2016/17. Within the last month, the government had announced that supported housing - including sheltered housing - was to be exempt from the rent reduction for one year.

The technical detail regarding the reduction and how local authorities are to effect the change were currently passing through Parliament. This meant that, unusually, officers did not have the prescribed calculation method. Officers were also assuming that the calculation method for the increase in rent for supported housing would be the original CPI +1% calculation. The CPI figure used for this calculation was the preceding September figure. As the CPI for September 2015 was -0.1%, the rent rise figure would be 0.9%. The report had therefore been presented to Cabinet with the best information available to officers at the time.

Cabinet was asked to note that in order to change any HRA rent liability, the Local Authority had to notify tenants and give 28 days’ notice of any change once the authority had made a properly constituted decision of that change. This meant that following Cabinet’s decision on rent levels to be charged in any year, the Local Authority was obliged to write to all tenants to inform them of the new rent liability for the following 12 months. In order to achieve this and make the new charge effective from the first week of April 2016, notification would have to be sent to tenants by the first week of March.

It was for the above reasons, that the report differed from previous years in the recommendations it was seeking approval for. As the precise calculation was as yet unknown, the report provided indicative levels of rent following a 1% reduction and the CPI + 1% rise for supported housing. It also sought approval to delegate the final decision on the exact amounts charged to the Cabinet Member for Housing and the Deputy Chief Executive - Communities and Resources. This would enable Cabinet to make a decision on the 2016/17 rent levels whilst enabling the precise amounts to be amended once the final calculation methods were announced, without any need for further referral back to Cabinet.

Reasons for the decision:

The Council was required to set the housing rent, service charges and a budget in accordance with the Local Government and Housing Act 1989.

Alternative Options Considered

There were no alternative options insofar as setting a budget was concerned. However, there were options in respect of the various elements of the budget. These were considered in the preparation of the budget and covered such elements as the rent and service charge increases, budget growth and major works programme proposals.