Agenda item

The Cabinet gave consideration to a report of the Director of Finance which set out for the Housing Revenue Account (HRA), the detailed budget estimates for 2022/23, the strategic estimates for the four years 2023/24 through to 2026/27 and outturn estimate for 2021/22. The report also sets out the recommended dwelling, non-dwelling rents and service and concierge charges to be applied from April 2022.

The report set out the HRA proposed 2022/23 original budget and the forecast outturn for 2021/22. The opportunity was also taken to present the provisional strategic budgets for 2023/24 through to 2026/27.

HRA activities are 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 2021/22 was estimated to be a £4.828m positive variance when compared to the original budget forecast for 2021/22 approved at the Budget Council meeting, 4 March 2021. Of this variance, £1.756m was attributable to a higher than anticipated brought forward balance from 2020/21 and the remaining £3.072m was as a result of the re-profiling of HRA funded capital schemes into later years due to revisions to planned spending profiles. The estimated balance at the end of 2021/22 was projected to be £22.291m.

The closing financial position for 2022/23 shows an estimated HRA closing balance of £20.483m which was sufficient to meet future operational commitments and the potential financial pressures identified in the risk assessment.

The 2022/23 position has been presented after allowing for an increase in dwelling rents of 2.1%, an 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.

The current Government policy guidance for the period 2020-2025 was that all rents are calculated based on a maximum of the Consumer Price Index (CPI) rate at September of the preceding year plus 1%.

Oldham’s projections for the 2022/23 budget had been set assuming rental increases of 2.1% which is 2% lower than if it were to follow the maximum uplift (September 2021 CPI rate being 3.1% plus 1%).

The Council has opted to propose this reduced rate given the current healthy levels of HRA balances and the ongoing pressures, including inflation, on household incomes.

The financial projections for the HRA over the period 2021/22 to 2026/27 showed an overall reduction in the level of balances from £22.291m at the end of 2021/22 to £8.123m at the end of 2026/27.

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

The HRA detailed budget for 2022/23 and strategic estimates for the four years 2023/24 to 2026/27 and the outturn estimate for 2021/22 were presented to the Policy Overview Scrutiny Committee on 27 January 2022. The Committee was content to commend the report to Cabinet without amendment.

Options/alternatives considered

For the Council to comply with legislative requirements, it must consider and approve a budget for the HRA for 2022/23.

Three options regarding rent levels are presented below.

•              • proposed rent increase of 4.1%

•              • proposed rent increase of 2.1%

•              • rents are frozen for 2022/23.

Compared to a 4.1% increase, the loss to the HRA for 2022/23 in terms of rental income would be, £0.184m at a 2.1% rent increase and £0.359m with no rent increase, as shown below.

Given the overall health of HRA balances, as previously mentioned in para 2.9, and the adverse impact of the pandemic on household income, it was proposed that Oldham Council approve rental increases in 2022/23 lowerthan the maximum levels available under current government guidance.

A full financial assessment has been undertaken to justify this proposal ensuring the HRA has the necessary resources to fully fund all known current and future commitments. Future years forecasts highlighted in Appendix D show that despite the lower than usual rental increase proposed in 2022/23, at no time does the HRA come close to the agreed minimum balance of £3m. The lowest balance estimated within the next 5 years being £7.019m in 2024/25.

Given the proposed reduction in balances due to the increased levels of RCCO for the period 2022/23 to 2024/25, it is evident that any decision to vary from the maximum income achievable may have an adverse impact on future project decisions. Whilst the Council has chosen to limit rent increases in 2022/23 to 2.1%, future rent proposals

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RESOLVED - That Cabinet approved and commended to Council the:

1.    Forecast HRA outturn for 2021/22 (as per Appendix A to the report)

2.    Proposed HRA budget for 2022/23 (as per Appendix B to the report)

3.    Strategic estimates for 2022/23 to 2026/27 (as per Appendix D to the report)

4.    Proposed increase to dwelling rents for all properties of 2.1%.

5.    Proposed increase to non-dwelling rents as per individual contracts.

6.    Proposal that service charges are unchanged from those of 2021/22.

7.    Proposal to set Extra Care Housing concierge charges to fully recover actual costs.