Agenda item

Consideration was given to a report of the Director of Finance which set out the latest Housing Revenue Account (HRA) outturn estimate for 2019/20, the detailed budget for 2020/21 and strategic estimates for the four years 2021/22 through to 2024/25. The report also set out the recommended dwelling, non-dwelling rents and service and concierge charges to be applied from April 2020.

The Cabinet noted that HRA activities were a key element of the Council’s Housing Strategy (approved by Council on 10 July 2019) which aimed to provide a diverse Oldham Housing offer that was attractive and met the needs of different sections of the population at different stages of their lives.

After taking all relevant issues into account, the projected financial position for 2019/20 was estimated to be a £2.273m positive variance when compared to the original budget forecast for 2019/20 approved at the Budget Council meeting, 27 February 2019. Most of this variance was attributable to the re-profiling of HRA funded capital schemes into later years due to revisions to planned spending profiles. The balance at the end of 2019/20 was projected at £21.750m.

The financial position for 2020/21 showed an estimated HRA closing balance of £18.230m which was sufficient to meet future operational commitments and the potential financial pressures identified in the risk assessment.

The 2020/21 position had been presented after allowing for an increase in dwelling rents of 2.7%, the increase in non-dwelling rents in line with individual contracts, the freezing of all service charges and the setting of Extra Care Housing and Holly Bank concierge charges to fully recover costs.

Members were reminded that the Government had previously advised that PFI properties were exempt from Central Government’s 1% Social Rent Reduction policy. This policy was due to end on 31 March 2020. In preparation, Central Government had recently issued updated guidance for the period 2020-2025 for all properties, confirming a return to rents being set based on the Consumer Price Index (CPI) rate at September of the preceding year plus 1%. All Oldham’s budget projections for the 2020/21 budget would follow the rent setting guidance of CPI plus 1%, resulting in an increase of

2.7% (CPI is taken as at September 2019).

The financial projections for the HRA over the period 2019/20 to 2024/25 showed an overall reduction in the level of balances from £21.750m at the end of 2019/20 to £7.713m at the end of 2024/25. This was because HRA resources were to be used to support several major approved housing capital projects including development at Princes Gate Site C, developing temporary accommodation to meet homelessness demands, developing purchase and repair / lease and repair pilot schemes in the private rented sector and financing the purchase of additional housing to add to the Council’s

HRA stock.

Options/Alternatives considered

In order that the Council complied with legislative requirements it must consider and approve a Housing Revenue Account budget for 2019/20.

Three options with regard to rent had been assessed.

1.     proposed rent increase of 2.7%

2.     proposed rent increase of 1.7%

3.     rents to be frozen for 2020/21.

Compared to a 2.7% increase, the loss to the HRA for 2020/21 in terms of rental income would be, £0.084m at a 1.7% rent increase and £0.229m with no rent increase.

The Cabinet was advised that, although losses in income for 2020/21 could be considered manageable, it was the cumulative impact of sustained losses of income that would have a lasting and significant impact on the long-term financial strength of the HRA and potentially its ability to meet its current and future financial commitments. This was emphasised with the inflation factor built into the Unitary Charge. A proportion of the Unitary Charge expenditure currently increased by an inflation factor linked to the Retail Price Index (RPI), therefore were the Council not to introduce the proposed rent increase, or to increase rents at a level below the current proposal, it would limit the ability of the HRA to meet its future financial commitments and support the aspirations of the Council’s wider Housing Strategy.

RESOLVED - That the following be approved and commended to Council:

1. Forecast HRA outturn for 2019/20 (as per Appendix A)
2. Proposed HRA budget for 2020/21 (as per Appendix B)
3. Strategic estimates for 2020/21 to 2024/25 (as per Appendix D)
4. Proposed increase to dwelling rents for all properties of 2.7%.
5. Proposed increase to non-dwelling rents as per individual contracts.
6. Proposal that service charges be unchanged.
7. Proposal to set Extra Care Housing and Holly Bank concierge charges to fully recover actual costs