Agenda item

Consideration was given to a report of the Director of Finance which set out the Housing Revenue Account (HRA) proposed 2021/22 original budget and the forecast outturn for 2020/21. The opportunity was also taken to present the provisional strategic budgets for 2022/23 through to 2025/26.

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 2020/21 was estimated to be a £1.384m positive variance when compared to the original budget forecast for 2020/21 approved at the Budget Council meeting, 26 February 2020. 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 2020/21 was projected at £19.614m.

The financial position for 2021/22 showed an estimated HRA closing balance of £17.463m which was sufficient to meet future operational commitments and the potential financial pressures identified in the risk assessment.

The 2021/22 position had been presented after allowing for an increase in dwelling rents of 1.5%, the increase in non-dwelling rents in line with individual contracts, the freezing of all service charges and the setting of Extra Care Housing 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 ended on 31 March 2020. Since this date, Central Government has reverted to its pre-2015 guidance for the period 2020-2025 for all properties, confirming all rents are calculated based on the Consumer Price Index (CPI) rate at September of the preceding year plus 1%. All Oldham’s budget projections for the 2021/22 budget will follow the rent setting guidance of CPI plus 1%, resulting in an increase of 1.5% (CPI is taken as at September 2020).

The financial projections for the HRA over the period 2020/21 to 2025/26 showed an overall reduction in the level of balances from £19.614m at the end of 2020/21 to £3.906m at the end of 2025/26.

This was because HRA resources were used to support several major approved housing capital projects including development within the town centre and on numerous smaller sites around the borough. There is also a commitment to purchase currently empty properties owned by private sector landlords to increase the number of Council owned housing stock.

Options/Alternatives considered

In order that the Council complied with legislative requirements it must consider and approve a Housing Revenue Account budget for 201/22.

Three options with regard to rent had been assessed.

1. proposed rent increase of 1.5%
2. proposed rent increase of 1.0%
3. rents to be frozen for 2021/22.

Compared to a 1.5% increase, the loss to the HRA for 2021/22 in terms of rental income would be £0.044m at a 1.0% rent increase and £0.131m with no rent increase.

The Cabinet was advised that, although losses in income for 2021/22 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 2020/21 (as per Appendix A)
2. Proposed HRA budget for 2021/22 (as per Appendix B)
3. Strategic estimates for 2021/22 to 2025/26 (as per Appendix D)
4. Proposed increase to dwelling rents for all properties of 1.5%.
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 concierge charges to fully recover actual costs