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Agenda Item No

The Vale of Glamorgan Council

Cabinet Meeting: 23 February 2015

Report of the Leader

Final Housing Revenue Account (HRA) Budget Proposals 2015/16

Purpose of the Report

1. To set the HRA budget for the financial year 2015/16 and to set the rents and service charges for the forthcoming rent year beginning on 6th April 2015.

Recommendations

It is recommended that:-

 

1. The final HRA budget proposals for 2015/16 are recommended to Council as outlined below:-

 


 

Proposed Budget

2015/16


£'000

HRA General

(15,416)

Housing Repairs

3,547

General Management

1,688

Special Services

682

Capital Expenditure from Revenue Account (CERA)

3,485

Central Support & Operational Buildings

1,239

Capital Financing

4,646

(Surplus)/Deficit for the Year

(129)

Working Balance Brought Forward

(2,892)

Working Balance Carried Forward

(3,021)



 

2. Option 2 for rent increases be approved and recommended to Council, as set out in paragraphs 12-23.

 

3. The increase suggested for other services are approved and recommended to Council, as set out in paragraphs 24-35.

 

4. The following charges for 2015/16 financial year be recommended to Council:-


50 Week Basis

Current Charges

Proposed Charges

Heating

£9.37 per week

£8.51 per week

Warden Support Charge

£7.08 per week

£5.63 per week

Warden Management Charge

£3.54 per week

£2.81 per week

VCAS:

- Piper

- Communicall

£4.19 per week

£4.75 per week

£4.34 per week

£4.92 per week

Grounds Maintenance

 £1.24 per week

 £1.27 per week

Cleaning of communal areas

£1.83 per week

£1.80 per week

Lighting of communal areas

£1.12 per week

£1.16 per week

Laundry Facilities

£0.23 per week

£0.27 per week

Window Cleaning

£0.28 per week

£0.29 per week

Lift Maintenance

£0.49 per week

£1.44 per week

Door Entry

£0.28 per week

£1.31 per week

Intercom

£1.00 per week

£1.06 per week

Sewerage Treatment Plants

£332.92per annum 

  Based on the Rateable 

 Value (RV) from the

     Welsh Water Schedule 2015-16




 5. All changes to rents and service charges are implemented from 6th April 2015 and that increase notices are sent to tenants 28 days in advance of the new charges coming into effect. 

Reasons for the Recommendations

1. As required by statute.

 

2. In order that new rent levels are set within the specified Welsh Government (WG) guidelines, whilst not negatively impacting upon the Housing Improvement Programme.

 

3. In order that the budget accurately reflects any changes necessary.

 

4. In order that new charges are approved in time for any administration changes to be carried out.

 

5. In order to meet the deadline to notify tenants of the new charges as required by Statute.

Background

2. Each local housing authority is required under Section 74, of the 1989 Local Government and Housing Act to keep a Housing Revenue Account.  Section 76 of the Act requires local authorities to set a budget for their Housing Revenue Account (HRA) on an annual basis.  The budget must be such that the Housing Revenue Account is not in deficit at the year end.

 

3. During the course of the year, local authorities must review their HRA expenditure and income and if, on the basis of the information available the account is heading for a deficit, they must take steps as are reasonably practical to prevent this deficit. A local authority is not prohibited from being in deficit but will need to demonstrate that the deficit has arisen through exceptional circumstances and that it has revised its original proposals so far as reasonably practical to avoid the deficit.  Such a deficit shall be carried forward and must be made good the following year.

 

4. Each local authority should endeavour to have a working balance on the HRA, for any exceptional circumstances that may arise.

 

5. In previous years the level of rent increase has been based on the Housing Subsidy Determination issued by the WG. However WG has changed the basis for rent increases as part of the new Policy for Social Housing Rents.  The new rent policy will apply to local housing authorities from April 2015 (regardless of whether exit from the HRA subsidy system has occurred).  The policy sets a target rent band for each authority.  If the average weekly rent is below the lower end of the target rent band, the authority is expected to increase average rents.  If the average rent is above the target rent band, then the authority is expected to increase rents at a rate lower than the guideline rent increase. The 2015/16 rent bands for each local authority were issued on 23rd December 2014, the agreed increase is 2.7%, this being the agreed CPI (as at September 2014) plus 1.5% laid out in the new rent policy.  However the Vale of Glamorgan would need to increase its rents by a minimum of 3.3% to ensure rents are within the lower limit of the rent band. 

 

6. The initial HRA budget proposals were considered by Cabinet on the 17th November 2014 (minute no. C2532). They were subsequently referred to the Housing and Public Protection Scrutiny Committee on 3rd December 2014, who noted the proposals as did Corporate Resources Scrutiny Committee on 9th December 2014.

Base Budget 2015/16

7. The Budget Strategy for 2015/16 outlined that, in order to establish a baseline, services should prepare revenue budgets for next year based on the cost of providing the current level of service and approved policy decisions. This means that the cost of price increases and pay awards should be included.

 

8. Due to the nature of the HRA in that it is ring fenced and any growth has to be funded from the balance, no cost pressures have been formally identified.  The budget is presented in the traditional objective analysis format.

 

9. The proposed 2015/16 budget is set out at Appendix 1.

  • HRA (General) - This budget head relates to net income from rents and service charges as well as general expenditure such as Tenant Participation Groups.
  • Housing Repairs - This budget relates to the revenue repairs and maintenance service for the Council Housing Stock. 
  • HRA Subsidy Payable - This budget relates to the estimated proportion of rent payable to WG.
  • General Management - This budget head relates to the general management of the Council's housing stock, for work carried out within the Housing service, and for various issues relating to the Council tenancies excluding the repairs and maintenance function.
  • Special Services - This budget relates to the running expenses and the cost of staff employed directly within the Housing service, in relation to functions such as sheltered housing schemes, running the hostel and temporary accommodation.
  • Capital Expenditure from Revenue Account (CERA) - This budget relates to a contribution made from the Housing Revenue Account to fund capital expenditure. 
  • Central Support & Operational Building Charges - This budget relates to the services provided by other Departments within the Council, and the cost of office accommodation occupied by the Housing Services staff.
  • Capital Financing - Costs associated with financing debt.

10. In summary the change in the budget is itemised as follows:-


2014/15

Original Budget

Inflation / Pay Award

Committed Growth / (Savings)

Estimated Rent Increase

2015/16

Proposed Budget

£000

£000

£000

£000

£000

3,514

99

 (3,163)

(579)

(129)






11. The committed savings of £3,163,000 are due to a number of factors:

  • A saving associated with the exit of the HRA Subsidy System, assuming the exit goes ahead in April 2015, of £5,043,000.
  • There is a decrease in the available CERA budget of £4,502,000 to finance the Housing Improvement Programme and meet Welsh Housing Quality Standards by 2017. This decrease is required to ensure the Housing Revenue Account balance remains within an acceptable limit.
  • A £37,000 decrease in Central Support recharges.
  • Further savings of £177,000 for 2015/16.

These have been partially offset by:

  • An increase in Capital Financing charges of £4,306,000, £3,988,000 relates to financing of the intended HRAS Subsidy exit, a further £318,000 is due to increased borrowing in the year required to finance the Housing Improvement Programme.
  • Increase in Repairs budget to accommodate works to void properties £633,000 and £300,000 for an external painting programme. 
  • Additional Staffing costs £317,000 per annum to support any redevelopment project and tenant management, anti-social behaviour co-ordinators and two estate handy-persons.
  • An increase in the Bad Debt Provision adjustment of £940,000, this represents 6% of gross annual rents, compared to 0.95% in 2014/15.  This is thought to be a prudent step, in line with similar authorities' plans.  This should allow for any negative impacts of Welfare Reform, and in particular, the Universal Credit on rent collection. 
  • It is also anticipated that, should the Universal Credit be adopted in the Vale of Glamorgan during the year, additional resources will be required at £100,000 per annum. However this will be closely monitored.

Proposed Increases in Rents

12. The Essex Review in 2008 put forward a case for restructuring existing social sector rents.  Across Wales rent policies had developed in different ways over a long period, producing markedly different levels and profiles of rents.   The rent review has sought to develop a coherent and consistent rent policy framework that would apply to all social landlords, reflect local variations in affordability and housing market values, providing for a more equitable distribution of rents for social sector tenants across Wales, while at the same time ensuring the viability of individual social landlords.

 

13. The new policy is a framework that will, apply to all social landlords and consistently reflect variations in the type, size, quality and location of each landlords housing stock.  However, setting the rents for individual dwellings will remain with individual landlords as is currently the case. The Vale of Glamorgan underwent a similar rent restructuring exercise in 2009, which took account of property type, size and location in the distribution of rents.  Therefore there is no proposal to review the current rent structure for 2015/16 only to apply an increase which is within the new policy.

 

14. The rent policy sets a target rent band for each landlord and landlords will be required to operate with average weekly rent levels that fall within the scope of those bands.  The target rent band provides a low end figure, a mid point and a high end figure for each landlord.  The average weekly rent level for each social landlord is compared to the target rent band.  Out of the eleven local housing authorities, nine would fall below their target rent band should they only apply a 2.7% increase. The Vale of Glamorgan is included in those nine.

 

15. Transitional measures have been put in place to ease the impact on the new policy on both landlords and tenants, and where landlords need to increase their average weekly rent so that it falls within the target rent band, transitional protection for tenants will apply. In any year landlords will not be permitted to increase the rents for any individual tenant by more than £2 per week in addition to the agreed average annual rate of rent increase for the sector as a whole (ie CPI+1.5%). The Vale of Glamorgan could increase rents by a maximum of 4.3%, without the need to introduce transitional arrangements.

 

16. The WG target rent band for the Vale of Glamorgan based on a 52 week rent year for 2015/16 is

Low end £86.11 per week

Mid point £90.64 per week

High end £95.17 per week

It should be noted that the equivalent average rent for comparison purposes for 2014/15 is £83.36 per week. A 2.7% increase on this average rent equates to £85.61 which is 50p below the low end rent band. Therefore a further increase of 0.60% would be necessary to comply with the new rent policy.

 

17. The minimum increase necessary therefore is 3.3%. The latest Housing Business Plan, however assumes a rent increase in 2015/16 of 3.5%.

 

18. Therefore an increase of 3.5% would be recommended as a minimum to ensure viability of the Business Plan as well as complying with the new rent policy.

 

19. As mentioned above, there is a transitional protection arrangement in place which ensures that rents cannot be increased by more than CPI plus 1.5% plus £2 for any individual tenant. The Vale of Glamorgan could choose to apply an increase of as much as 4.3% without the need to introduce transitional protection.

 

20. There are therefore 3 options for rent increase:-

Option 1 - increase by the absolute minimum allowable by WG, 3.3%, this would generate an average rent of £86.11, comply with the new rent policy, but would translate to an increase in the required borrowing for the Housing Investment Plan of £149,000.

Option 2 - increase by 3.5%, this would generate an average rent of £86.28, comply with the new rent policy, and not impact on the level of borrowing required for the Housing Business Plan.

Option 3 - increase by the maximum allowable by WG 4.3%, this would generate an average rent of £86.95, comply with the new rent policy, and, reduce the level of borrowing required to fund the Housing Investment Programme by approximately £578,000.

 

21. It is usual practice that the Vale of Glamorgan only increase rent by an amount specified via Department for Work and Pensions (DWP) to prevent a breach of the Housing Benefit Rent Rebate Limitations. Breach of the limitation would mean that the HRA would be liable for a proportion of the additional increase. At this stage however, details regarding the DWP limit under the new rent policy is unknown.

 

22. A 3.5% rent increase would equate to a £2.92 per week increase, based on a 52 week rent. The Vale of Glamorgan will charge rents over 50 weeks in 2015/16.  The equivalent average weekly rent increase is £3.04 per week.

 

23. The target rent increase per property type based on an increase of 3.5% is detailed below:-

 


    Type

Present Target Rent for 2014/15

(Based on 50 Chargeable Wks)

Proposed Average Rent Incr (+)/ Decr (-)

(Based on 50 Chargeable Wks)

Proposed Average Target Rent for 2015/16

(Based on 50 Chargeable Wks)

Bungalow

 £85.42 per week

 +£2.99 per week

     £88.41 per week

Flat

£74.59 per week

+£2.61 per week

£77.20 per week

House

£92.93 per week

+£3.26 per week

£96.19 per week

Maisonette

£81.51 per week

+£2.86 per week

£84.37 per week

TOTAL

£85.13 per week

+£2.99 per week

£88.12 per week

Proposed Increases in Other Charges

24. Garage Rents - The rent of freestanding garages is currently £6.84 per week.  It is proposed that rent for all garages are increased by 3.5% to £7.08 per week.  This percentage increase is in line with the recommended increase to dwelling rents.

 

25. Ty Iolo Hostel - The current charge for persons accommodated is £153.88 per week. It is proposed that the weekly rent charge is increased by 3.5% to £159.27 per week. As rooms at the hostel are classified as HRA dwellings, the rents charged are also subject to Housing Benefit Rent Rebate Limitations, which means that hostel rents should be in line with recommended rent increase. 

 

26. 28 Evans Street, Barry - This property, owned by the Council, is let to Llamau Housing Trust and comprises of six units of accommodation.  The current weekly charge is £513.00. It is proposed that the charge be increased by a maximum of 3.5%, in line with the recommended increase for the Hostel. The weekly charge will therefore be £530.96 per week.

 

27. Temporary Accommodation - The average current weekly charge including additional management, utility and service charge costs is £152.22. It is proposed that the rent element be increased by a maximum of 3.5%, in line with the WG recommended guideline increase. The weekly charge will therefore be £157.55 per week.

 

28. Sheltered Housing Guest Suites - It is proposed that the charges for guest room facilities are increased by 3.5% to £11.87 per person per night for double occupancy and £16.97 for single occupancy.

 

29. Vale Community Alarm Service (VCAS) - This is a charge which forms part of the inclusive rent, but is separately identifiable.  It has been proposed to increase the VCAS charges by 3.5%.

 

30. The charges in the following paragraphs are based on the agreed Service Charge Policy which states that charges would be based on the best estimated cost of providing the service in the forthcoming year, using prior year's information and any known contract costs:-

 

31. Heating - The cost of providing heating to sheltered properties has decreased.  It is proposed that the charge be decreased from £9.37 per week to £8.51 per week based on the actual costs incurred in the 12 months prior to the budgeting period.

 

32. Warden Management & Support Charge - The cost of providing Warden Management & Support has reduced, this is based on actual costs incurred in the 12 months prior to the budgeting period.  The proposed charge for the Warden Management element is £2.81 per week, and the proposed charge for the Warden Support element is £5.63 per week. 

 

33. Lift Maintenance - The cost of lift maintenance has increased, this is largely due to an increase in the number of emergency call-outs.  It is proposed that the charge be increased from £0.49 per week to £1.44 per week based on the actual costs incurred in the 12 months prior to the budgeting period.

 

34. Door Entry - The cost of providing maintenance on the door entry systems has increased. It is proposed that the charge be increased from £0.28 per week to £1.31 per week based on the actual costs incurred in the 12 months prior to the budgeting period.

 

35. Sewerage Treatment Plants - The charge to owners of all purchased and private dwellings connected to Council owned and maintained treatment plants is currently £332.92 per annum, based on the average charge payable if the properties were connected to the main sewerage system. It is proposed that these dwellings continue to be charged at a similar sewerage rates to the Water Schedule 2015/16 issued by Dwr Cymru Welsh Water. The Welsh Water Schedule was not available at the time of writing.

Next Steps

36. Cabinet's final budget proposals will be considered by Council at a meeting to be held on 4th March 2015.

Resource Implications (Financial and Employment)

37. The Housing Revenue Account projected working balance at 1st April 2015 is £2.892M and is projected at £3.021M on 1st April 2016.

Legal Implications (to Include Human Rights Implications)

38. The Council under the 1989 local Government and Housing Act have a legal obligation to set a budget for the Housing Revenue Account.  Notices of any increases have to be sent to tenants 28 days in advance of the new changes coming into effect.

Crime and Disorder Implications

39. Many HRA activities have a positive impact on the reduction of crime and the fear of crime.

Equal Opportunities Implications (to include Welsh Language issues)

40. Housing Services are carried out in accordance with the Councils Equal Opportunities policies and practices.

Corporate/Service Objectives

41. Housing Services support the following Corporate/Service objectives:-

  • Social Well Being and Tackling Disadvantage
  • Ensuring that all Vale residents have access to good quality, affordable and appropriate accommodation that is sufficient for their needs.
  • Environmental Improvement
  • Maintaining and improving the quality of the public housing stock
  • Community Leadership
  • Encouraging tenants and residents to participate in the management of housing stock.

Policy Framework and Budget

42. This report is following the procedure laid down in the Constitution for the making of the budget. It is a matter of endorsement by the Cabinet and approval by the Council.

Consultation (including Ward Member Consultation)

43. The Corporate Management Team has been consulted on this report. The initial budget proposals do not require Ward Member consultation.

Relevant Scrutiny Committee

44. Housing and Public Protection is the relevant Scrutiny Committee.

Background Papers

Housing Business Plan - December 2014

Welsh Government's Policy for Social Housing Rents

Contact Officer

Lori Bigglestone- Accountant

01446 709236

Officers Consulted

Carolyn Michael - Operational Manager - Accountancy

Hayley Selway - Head of Housing & Building Services

Mike Ingram - Operational Manager Public Housing Services

Responsible Officers:

Miles Punter - Director of Visible Services and Housing

Sian Davies - Managing Director

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