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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting 16th November 2011

 

Joint Report of the Leader and the Cabinet Member for Housing and Community Safety

 

Final Housing Business Plan 2011

 

Purpose of the Report

1.             To present the final Housing Business Plan and update members on the changes made.

Recommendations

1.             That the Housing Business Plan be recommended to Council for approval

Reasons for the Recommendations

1.             To obtain approval for the Housing Business Plan so that it may be submitted to the Welsh Government.

 

Background

2.             The Welsh Government (WG) requires that all Local Authorities who wish to retain their stock are to submit annually an acceptable Housing Business Plan that includes a detailed financial forecast in the form of a 30 year financial model.

3.             Submission to the WG must be made no later than the 31st December 2011 which forms the basis of the MRA (Major Repairs Allowance) grant application, a pivotal financing component for the housing investment programme.

4.             The Draft Housing Business Plan was taken to Cabinet on the 19th October 2011 (minute C1480). Cabinet resolved that -

(1) the changes to the draft Housing Business Plan as outlined in the report be noted.

(2) the draft Plan be referred to the Scrutiny Committee (Corporate Resources) and to the Scrutiny Committee (Housing and Public Protection).

(3) the draft Plan be referred for consultation with the Tenants Panel.

(4) the Housing Business Plan be brought back to Cabinet following consultation

 

Relevant Issues and Options

5.             Since that date the Plan has been considered by Housing and Community Safety and Corporate Resources Scrutiny Committees.

6.             The Tenant's Panel were consulted on the 3rd November 2011. They had some questions regarding the Plan and its funding, the way in which works were procured and subsequently managed. It was felt all contractors including Building Services should be subject to the same requirements and standards in carrying out the work.  The Panel expressed a desire for improvement works and repairs to be properly inspected and supervised.

7.             Discussion was held on the environmental blue print in development and the role of the community in delivering improvements. The exterior appearance of properties and painting was mentioned together with ground maintenance issues. A point was made that areas which were the responsibility of other Council departments such as pavements were also sometimes a problem. Discussion also took place with regard to Solar Panels and the feasibility of their installation.

8.             With regard to revenue expenditure the Panel wished to see more front-line resources "on the ground" in tackling day to day housing management issues.

9.             In response to the consultations an additional capital expenditure of £2M has been included in the Final Business Plan compared to the Draft. The Head of Housing is working on a revised structure with a view to putting more front-line resources in place, for which funding exists in the Business Plan.

Changes to the Base Model

10.        The most significant change since the Draft Plan is the inclusion of an additional £2M capital expenditure, £1M in year 3 and £1M in year 4. Other changes include the incorporation of the additional information presented to Scrutiny Committees, most notably the Investment Programme to 2016/17. The final Housing Business Plan is attached as an appendix to this report.

11.        The document incorporates the most recent investment requirements as identified by the 2007 Stock Condition Survey conducted by Savills, adjusted for works carried out since that date. The following gives a summary of the major changes made to the base model assumptions within the Final Housing Business Plan 2011 compared to the last approved Plan in 2010:-

Assumption

November 2010

October 2011

Minimum level of balances to be maintained

£450,000 in real terms

£600,000 in real terms

Rents

£68.50 per week (average) calculated on a 52 week basis for 2010/2011, and to increase by inflation target + 1% from 2011/12 onwards in line with the notional rent guideline increase as per latest WAG determination.

£72.24 per week (average) calculated on a 52 week basis for 2011/2012, and to increase by inflation target +1% from 2012/13 onwards in line with the notional rent guideline increase as per latest WAG determination.

All other revenue income & expenditure

Based on 2010/11 budget

Based on 2011/12 budget including additional staff, consultancy fees and IT improvements & investments.

Estate Safety Improvements

None

£50k pa (Year 2-6)

 

12.        Minimum level of balances to be maintained - This has been increased to £600,000 (real terms) which approximates to 5% of gross expenditure. This is considered to be a prudent level.

13.        Rents - The actual average rent for all council dwellings has been adjusted accordingly to reflect year 1 as 2011/12. The base still assumes rent will increase by inflation target + 1% which is in line with guideline rent as per WG guidance.

14.        All other revenue income & expenditure -  A number of additional posts are required to deliver WHQS and include:

·               The Project Manager (Yr 1-6) - to continue to drive the Housing Capital Programme (supported by the Operational Manager of Property Services)

·               Additional Staff (Yr 1-6) - to ensure integration of activities, consistency in delivery and to provide support to tenants through the improvement programme.

 

15.        The grade of the above positions will be subject to Job Evaluation but an estimated cost, at the top of grade including employers on cost is £209k.

 

·               Other Revenue Expenditure includes:

·               Consultancy Fees £20k (Yr 1) – to assist with the implementation of the Keystone Asset Database.

·               IT Improvements £20k (Yr 2) - to maintain and improve the existing Housing IT system.

·               IT Investment £150k pa (Yr 7-11) & (Yr 22-26) - to replace the Housing IT system.

·               Additional Licence Fees £30k pa (Yr 7-30) - additional costs as a result of a new Housing IT system.

·              

16.        All prices are at today's prices and are uplifted at the rate of inflation in the business plan.

17.        Estate Safety Improvements - An allowance of £50,000 per annum for years 2-6 has been set aside to improve the safety of estates through community safety initiatives such as fencing, street lighting and landscaping.

18.        Additional Staff - The following positions can be funded from the 8% fee element of the capital programme as provided for in the Housing Business Plan.

·               The Quantity Surveyor - responsible for managing the budget and all the contractual elements of the framework. They will help develop and implement the partnering framework.

·               The Framework Manager - will be required to manage, organise and control the provision of a consistently high quality tenant focused partnering framework which will deliver the WHQS. They will help develop and implement the framework and will then be responsible for monitoring and reporting on performance indicators. They will promote and develop initiatives to improve the quality of tenants' homes.

·               4 x Maintenance Officers - will undertake the role of Clerk of Works. The Clerk of Works will be responsible for ensuring that the WHQS works are carried out to the specified quality and in accordance with the agreed programme.

·               Technical Salary Costs - Equivalent to 1 x P03 post.

·               Building Surveyor

 

19.        The latest projections are attached at Appendix H(i) and H(ii) to the Plan. These show a reduction in the maximum amount of unsupported debt (prudential borrowing) at any time to £31.73M (previously £35.12M), and an increase in the revenue surplus after 30 years to £102.17M (previously £58.68M). Based on Prudential Borrowing of £32.88M it is anticipated that the authority could make early repayments during the later years of the Plan and repay any outstanding debt by 2029/30 (previously 2034/35).

20.        Below is a summary of the movement in the financial position compared to the previous base:

 

November 2010

November 2011

Difference

WHQS Target

2016/17

2016/17

No Change

Prudential Borrowing

£38.06 million

£32.88 million

-£5.18 million

Peak Debt

£35.12 million

£31.73 million

-£3.39 million

Repayment of Debt

2034/35

2029/30

-5 years

Revenue Surplus in year 30

£58.68 million

£102.17 million

+£43.49 million

 

Sensitivity Analysis and Risk Assessment

21.        One of the major risks to the council is the impact of prudential (unsupported) borrowing, which is required to ensure WHQS is met in 2016/17. The costs of borrowing must be able to be met from the HRA and it needs to be borne in mind that should the stock transfer in the future, any outstanding unsupported borrowing would fall to be met from the General Fund. The implications for this are set out in the Business Plan.

22.        There are a number of risks associated with the assumptions used in the financial projections for the business plan with some of the potential risks modelled in the Plan. The list is not exhaustive but outlines some risks to the main financial parameters and provides an indication of impact. Additionally, the authority may experience one or a combination of factors for a period greater or less than that modelled. In addition, some of the sensitivities have an "upside" e.g. if repairs cost increases are less than assumed.

23.        For sensitivities 6 and 7 (risks in the receipt of the Major Repairs Allowance) modelled in the Plan, whilst the Council's Housing Business Plan is technically viable the level of peak debt could be potentially viewed by the Council as an unacceptable level of risk. Additionally, the HRA reserve surplus at year 30 is considerably reduced.

24.        The above table shows that there is capacity for the Council to absorb a degree of risk. However, significant changes to some assumptions could have a severe impact and potentially make the existing investment programme financially unviable.

25.        A further risk for the Council is changes to the financial regime in which it operates, e.g. rules on prudential borrowing so the Council is unable to borrow to carry out improvements.

26.        There are extensive monitoring and regulatory arrangements that govern the Council’s finances. In reality the Council would take steps to avoid severe financial consequences and so the risks are consequently more likely to impact on the level of improvement to properties and level of service provided to tenants.

27.        Whilst all sensitivities result in a plan that is financially viable the level of prudential borrowing could potentially be very high and so Council Members need to consider the risk to the council that is deemed reasonable.

28.        Leaseholders will be responsible for a proportion of costs of the improvement works. There is a need for formal consultation as there are a set of stringent steps that need to be followed in order to ensure the costs of works are recouped by the Council. The legal implications are currently being reviewed including the importance of timescales such as an observation period where leaseholders can nominate an alternative contractor.

29.        It is important to note that the Housing Business Plan assumes that capital and revenue works to leasehold properties are recoverable from the leaseholder. It is therefore critical that a procedure is in place to minimise any unrecoverable costs

 

Resource Implications (Financial and Employment and Climate Change, if appropriate)

30.        The figures in the Housing Business Plan are projections and if financial conditions worsen then the level of investment proposed may not be achievable.  Importantly, the Welsh Government guide rent increase and the amount of subsidy repayable for next financial year are not yet known.

31.        The total level of required Prudential Borrowing is £32.88M and peak is £31.73M.

32.        The Housing Revenue Account working balance at 1st April 2011 is £12.126m. This is an increase of £2.578m to the balance at 1st April 2010 which was used in the November 2010 base.

Legal Implications (to Include Human Rights Implications)

33.        It is a legal requirement of the Welsh Assembly Government that each Local Authority produces a business plan and 30 year financial forecast describing how it will provide the investment to meet the Welsh Housing Quality Standard (WHQS).

Crime and Disorder Implications

34.        Many of the requirements of the WHQS contribute to the Crime and Disorder agenda, in particular the requirements of safe and secure dwellings located in safe and attractive environments

Equal Opportunities Implications (to include Welsh Language issues)

35.        The Housing Investment Programme improves the Council’s opportunities for assisting disadvantaged members of society. An equality impact assessment will be conducted on the Housing Business Plan. Carrying out the assessment involves systematically assessing the likely (or actual) effects on people in respect of disability, gender, sexuality (including gender identity), age, Welsh language, and racial equality.

Corporate/Service Objectives

36.        Meeting the WHQS contributes to the Councils corporate priority of making the Vale and safe, healthy and enjoyable place to live via good quality housing and to achieve a quality environment

Policy Framework and Budget

37.        This report is a matter for endorsement by the Cabinet and approval by the Council

Consultation (including Ward Member Consultation)

38.        The Leader and the Cabinet Member for Housing Services have been consulted.

39.        The Trade Unions were consulted on the draft Housing Business Plan and will continue to be consulted as the Housing Improvement Programme progresses.

Relevant Scrutiny Committee

40.        Corporate Resources

Background Papers

Housing Stock Transfer - Council's Offer to Tenants - November 2010

Housing Revenue Account Subsidy (HRAS) and Item 8 Determination

Major Repairs Allowance (MRA) Terms & Conditions

A New Policy for Social Housing Rents (Consultation Paper), Welsh Assembly Government - 31st March 2011

Residential Long Leaseholders, A guide to your rights and responsibilities, Department for Communities and Local Government (DCLG)

 

 

Contact Officer

Rhodri Morgan - Accountant

 

Officers Consulted

Sian Davies - Director of Finance, ICT & Property

Tony Jaques - Head of Housing Services

 

Responsible Officer:

Sian Davies - Director of Finance, ICT and Property

Peter Evans - Director of Legal, Public Protection and Housing Services

 

 

 

 

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