Agenda item

A report which sets out for the Housing Revenue Account (HRA), the detailed budget estimates for 2024/25, the strategic estimates for the four years 2025/26 through to 2028/29 and outturn estimate for 2023/24.

The Cabinet considered a report of the Director of Finance that set out, for the Housing Revenue Account (HRA), the detailed budget estimates for 2024/25, the strategic estimates for the four years 2025/26 through to 2028/29 and the outturn estimate for 2023/24. The report also sets out the recommended dwelling, non-dwelling rents and service and concierge charges to be applied from April 2024.

The Director of Finance’s report set out the HRA 2024/25, the proposed original budget and the forecast outturn for 2023/24. The opportunity was also taken to present the provisional strategic budgets for 2025/26 through to 2028/29. 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 is attractive and meets 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 2023/24 was estimated to be a £0.032m favourable variance when compared to the original budget forecast for 2023/24 approved at the Budget Council meeting on 1^st March 2023. Of this variance, £0.273m is due to higher utility costs and increased unitary charges. This adverse variance is offset by £0.305m higher than anticipated brought forward balances from 2022/23.

The estimated balance at the end of 2023/24 was projected to be £20.884m. The closing financial position for 2024/25 shows an estimated HRA closing balance of £19.571m which is sufficient to meet future operational commitments and the potential financial pressures identified in the risk assessment.

The 2024/25 position has been presented after allowing for a proposed increase in dwelling rents of 7.7%, an increase in non-dwelling rents in line with individual contracts, a nominal increase of 2% on service charges and the setting of Extra Care Housing concierge charges to fully recover costs.

The majority of HRA tenants are either the recipient of Housing Benefit or Universal Credit, meaning that part or all of the increase will be covered by tenant’s benefits. Coupled with the recent increase in the Local Housing Allowance, it is assumed that the proposed increase in rents will not represent an unmanageable additional financial burden to tenants. For the Council to finance the construction of any new build social housing through the HRA, it is essential that increased costs are covered by rent increases so that the HRA can remain financially sustainable.

The financial projections for the HRA over the period 2023/24 to 2028/29 show an overall reduction in the level of balances from £22.584m at the start of 2023/24 to £16.872m at the end of 2028/29. The HRA detailed budget for 2024/25 and strategic estimates for the four years 2025/26 to 2028/29 and the outturn estimate for 2023/24 were presented to the Governance, Strategy and Resources Scrutiny Board on 26 January 2024. The Committee was content to commend the report to Cabinet without amendment.

Options/alternatives considered:

The report advised that for the Council to comply with legislative requirements, it must consider and approve a budget for the HRA for 2024/25.

Two options regarding rent levels were presented in the submitted report. These options showed the comparison in rental income levels against the proposed option of a 7.7% increase:

a.    A proposed rent increase of 5%

b.    Rents to be frozen for 2024/25

Compared to a 7.7% increase, the loss to the HRA for 2024/25 in terms of rental income would be £0.262m at a 5% rent increase and £0.746m with no rent increase. This was compounded when taken over the life of the PFI contract with rental losses of £4.162m and £11.870m respectively.

Resolved:

That the Cabinet endorses and commends to Council:

1.    The Forecast HRA outturn for 2023/24, as detailed at Appendix A, to the submitted report.

2.    The Proposed HRA budget for 2024/25, as detailed at Appendix B, to the submitted report.

3.    The Strategic estimates for 2024/25 to 2028/29, as detailed at Appendix D, to the submitted report.

4.    The proposed increase to dwelling rents for all properties of 7.7%.

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

6.    The proposal that service charges are increased by 2%.

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