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Agenda Item No. 8(d)

 

THE VALE OF GLAMORGAN COUNCIL

 

COUNCIL MEETING: 2 MARCH 2016

 

REFERENCE FROM CABINET:  22 FEBRUARY 2016

 

C3082                        Final Housing Revenue Account (HRA) Budget Proposals 2016/17 (L) (Scrutiny Committee - Housing and Public Protection) –

 

Approval was sought to set the HRA budget for the financial year 2016/17 and to set the rents and service charges for the forthcoming rent year beginning on 4 April, 2016.

 

Each local housing authority was required under Section 74, of the 1989 Local Government and Housing Act to keep a Housing Revenue Account.  Section 76 of the Act required 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 was not in deficit at the year end.

 

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

 

The basis of rent increase was set by the Welsh Government Policy for Social Housing Rents.  The policy set a target rent band for each authority.  In order to comply with the rent policy, social landlords had to ensure their average weekly rent for their general needs and sheltered housing was within their target rent bands.  Landlords also had to ensure a tenant’s rent was not increased by more than (CPI +1.5%) plus £2 per week. 

 

The 2016/17 rent bands for each local authority were issued on 16th December 2015, the agreed increase was CPI (as at September 2015 (-0.1%)) plus 1.5% +£2.00, i.e. 1.4%+£2.00 as laid out in the new rent policy.

 

The initial HRA budget proposals were considered by Cabinet on 16 November, 2015 (minute no. C2975 refers). They were subsequently referred to the Scrutiny Committee (Housing and Public Protection) on 2 December, 2015 who noted the proposals as did Scrutiny Committee (Corporate Resources) on 8 December, 2015.

 

Base Budget 2016/17

 

The Budget Strategy for 2016/17 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 meant that the cost of price increases and pay awards should be included.

 

Due to the nature of the HRA in that it was ring fenced and any growth had to be funded from the balance, no cost pressures had been formally identified.

 

The proposed 2016/17 budget was set out at Appendix 1 attached to the report and was identified over the following areas.

 

  • Supervision      & Management (General) - This budget head related 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.
  • Supervision      & Management (Special) - This budget related 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.
  • Housing      Repairs - This budget related to the revenue repairs and maintenance      service for the Council Housing Stock.      
  • Capital      Financing - Costs associated with financing debt.
  • Rents,      Rates, Taxes and Other Charges - This budget head related to items such as      expenditure on Council Tax at long void properties, legal expenses,      surveying costs, compensation and Insurance.
  • Increase      in Provision for Bad Debts - This budget identified the amount by which      the current level of provision should be increased by in year.
  • Capital      Expenditure from Revenue Account (CERA) - This budget related to a      contribution made from the Housing Revenue Account to fund capital      expenditure. 
  • Dwelling      Rents - This was the net rent due to the Council for all properties      whether General Needs, OAP designated, Sheltered Complexes, Hostel or      Temporary Accommodation.
  • Non      Dwelling Rents - This represented rental income due to the Council for HRA      owned garages.
  • Interest -      This budget related to Interest receivable on the average HRA Reserve      Balance.
  • Charges      for Services and Facilities - This budget identified amounts due to the      Council by tenants and leaseholders and some private individuals for      services and facilities provided by the HRA.

 

In summary the change in the budget was itemised as follows:-

 

2015/16

Original Budget

Inflation /

Pay Award

National Insurance Change

Committed Growth / (Savings)

Rent Increase

Increase/ (Decrease) in CERA

2016/17

Proposed Budget

£000

£000

£000

£000

£000

£000

£000

(129)

131

            34

         1,051

(552)

(557)

(22)

 

Inflation included an allowance of 1% pay awards in 2016/17.  1% increase in pay amounted to approximately £18,000.

 

The impact of the changes to Employer National Insurance Contributions for Housing staff had been identified as £34,000.

 

A decrease in Capital Expenditure from Revenue Account (CERA) to finance the Housing Improvement Programme of £557,000 had been assumed. The amount of revenue contribution required was dictated by available revenue balances and the value of the Housing Improvement Programme. Adjusting the level of CERA by this amount would leave a minimum HRA Reserve of £633,000, which was in line with the latest Housing Business Plan.

 

The net growth of £1,051,000 was due to a number of factors;

 

  • An increase in capital financing charges of £660,000 in relation to unsupported borrowing being taken out in 2016/17 to fund the Housing Improvement Programme, and adjustments required following the HRAS buy-out.
  • An adjustment to the net rental due from dwellings of £260,000 to account for properties no longer accounted for in the HRA.
  • An increase in staff costs for increments and staff changes of £40,000.
  • An increase of £60,000 in central recharges.
  • A contribution of £22,000 to support the Safer Vale team for activities which benefit Council tenants and leaseholders.
  • An increase of £74,000 on the bad debt provision, to reflect the assumption that 6% of net rental income would need to be provided for, to mitigate the potential increase in arrears following the introduction of Universal Credit during 2016/17.
  • These had been offset by minor favourable adjustments totalling £65,000.

Proposed Increases in Rents

 

The rent policy set a target rent band for each landlord and landlords were required to operate with average weekly rent levels that fall within the scope of those bands. The target rent band provided a low end figure, a mid-point and a high end figure for each landlord.  The average weekly rent level for each social landlord was compared to the target rent band.  In addition, the maximum amount a social landlord could increase an individual tenant’s weekly rent was CPI +1.5% plus £2 (i.e. 1.4% plus £2).  If the Vale of Glamorgan applied a 1.4% plus a maximum of £2.00 per week rent increase to Council House Rents then the average weekly rent would fall within the target rent band.  The additional increase would be applied across the stock based on the local rent policy currently in place.

 

It was usual practice that the Vale of Glamorgan only increased 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 was unknown.

 

It was proposed that rents were increased within the limit of 1.4% plus the maximum of £2 and had been set in line with the existing rent policy, which took into account the number of bedrooms, type and size of property along with location, whilst still ensuring that the current Housing Business Plan commitments in terms of new build and regeneration were achieved. The rent increase per property type was detailed below:-

 

    Type

Present Target Rent for 2015/16

 

 

(Based on 50 Chargeable Weeks)

 

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

 

(Based on 50 Chargeable Weeks)

Proposed Average Target Rent for 2016/17

 

(Based on 50 Chargeable Weeks)

 

Bungalow

  £88.41 per week

     +£3.00 per week

     £91.41 per week

Flat

£77.20 per week

+£2.64 per week

£79.84 per week

House

£96.19 per week

+£3.28 per week

£99.47 per week

Maisonette

£84.37 per week

+£2.87 per week

£87.24 per week

TOTAL

£88.21 per week

+£3.00 per week

£91.21 per week

 

Proposed Increases in Other Charges

 

Garage Rents - The rent of freestanding garages was currently £7.08 per week.  It was proposed that rent for all garages be increased by 3.4% to £7.32 per week.  This percentage increase was broadly in line with the rent increase.

 

Ty Iolo Hostel - The current charge for persons accommodated was £159.27 per week. It was proposed that the weekly rent charge be increased by 1.4%+£2.00 to £163.50 per week. As rooms at the hostel were classified as HRA dwellings, the rents charged were also subject to Housing Benefit Rent Rebate Limitations, which meant that hostel rents should be in line with recommended rent increase. 

 

28 Evans Street, Barry - This property, owned by the Council, was let to Llamau Housing Trust and comprised of six units of accommodation.  The current weekly charge was £530.96. It was proposed that the charge be increased by a maximum of 1.4%+£2.00, in line with the recommended increase for the Hostel. The weekly charge would therefore be £540.39 per week.

 

Temporary Accommodation - The average current weekly charge including additional management, utility and service charge costs was £157.55. It was proposed that the rent element be increased by a maximum of 1.4%+£2.00, in line with the WG recommended guideline increase. The total charge would therefore be £161.76.

 

Sheltered Housing Guest Suites - It was proposed that the charges for guest room facilities be increased by 3.4% to £12.27 per person per night for double occupancy and £17.54 for single occupancy.

 

Vale Community Alarm Service (VCAS) - This was a charge which formed part of the inclusive rent, but was separately identifiable.  No increase was proposed on VCAS charges and a review of the charging structure currently in place would be undertaken in during 2016/17.

 

The charges in the following paragraphs were based on the agreed Service Charge Policy which stated 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:-

 

Heating - The cost of providing heating to sheltered properties had decreased.  It was proposed that the charge be decreased from £8.51 per week to £7.97 per week based on the actual costs incurred in the 12 months prior to the budgeting period.

 

Warden Management & Support Charge - The proposed charge for the Warden Management element was £4.94 per week, and the proposed charge for the Warden Support element was £5.63 per week. 

 

Lift Maintenance - The cost of lift maintenance had reduced, this was due to a decrease in the number of emergency call-outs.  It was proposed that the charge be decreased from £1.44 per week to £0.83 per week based on the actual costs incurred in the 12 months prior to the budgeting period.

 

Door Entry & Intercom - The cost of providing maintenance on the door entry systems had decreased. It was proposed that the charge be decreased from £1.31 per week to £1.18 per week based on the actual costs incurred in the 12 months prior to the budgeting period. Similarly the cost of providing the Intercom systems had decreased from £1.06 per week to £0.98 per week.

 

Sewerage Treatment Plants - The charge to owners of all purchased and private dwellings connected to Council owned and maintained treatment plants was currently £318.45 per annum, based on the average charge payable if the properties were connected to the main sewerage system. It was proposed that these dwellings continued to be charged at a similar sewerage rates to the Water Schedule 2016/17 issued by Dwr Cymru Welsh Water. The Welsh Water Schedule was not available at the time of writing.

 

Cesspool emptying - Cabinet resolved on 21 September, 2015 (minute number C2917 refers), to begin charging for cesspool emptying for council owned cesspools at various sites in the Vale of Glamorgan.  For those cesspools serving Council House tenants, it was agreed that the tenants would pay a subsidised rate, with the difference being met from the HRA.   The charge to tenants would be based on an equivalent rate to those properties connected to the main sewerage system.  It was proposed therefore that the dwellings be charged a rate equivalent to the Water Schedule 2016/17 issued by Dwr Cymru Welsh Water.  Whilst the schedule was not available at the time of writing, the 2015/16 equivalent rates were in the region of £6.15 per week. 

 

Cabinet's final budget proposals would be considered by Council at a meeting to be held on 2 March, 2016.

 

At the meeting, the Cabinet Member for Housing, Building Maintenance and Community Safety commented that the Council had utilised the rent scale set by Welsh Government and was within the banding set by Welsh Government as it was considered a good balance between fair rents and not running a deficit. The Cabinet Member also drew attention to the Council’s excellent rent collection figures, at less than 1% uncollected, and she was confident the Council would deliver a balanced budget.

 

This was a matter for Executive and Council decision

 

Cabinet, having considered the report and all the issues and implications contained therein

 

RESOLVED –

 

That Cabinet Recommends the following to Council:-

 

(1)       T H A T the final HRA budget proposals for 2016/17 be recommended to Council as outlined below:-

 

 

Proposed Budget

2016/17

 

£'000

Expenditure

 

Supervision &   Management

5,140

Repairs and   Maintenance

3,858

Capital Financing   Costs

5,306

Rent, Rates &   Taxes & Other Charges

318

Increase in Bad   Debt Provision

1,093

Capital Expenditure   from Revenue Account (CERA)

2,931

 

 

18,646

Income

 

Dwelling Rents

(17,759)

Non Dwelling Rents

(319)

Interest

(5)

Charges for   Services and Facilities

(585)

 

(18,668)

(Surplus)/Deficit   for the Year

 

 (22)

Working Balance Brought   Forward

(611)

Working Balance   Carried Forward

(633)

 

(2)       T H A T a rent increase of 1.4% plus a maximum of £2.00 be approved and recommended to Council, as set out in paragraphs 16-19 of the report.

 

(3)       T H A Tthe increase suggested for other services be approved and recommended to Council, as set out in paragraphs 20-32 of the report.

 

(4)       T H A T the following charges for 2016/17 financial year be recommended to Council:-

 

 

50 Week Basis

 

Current   Charges

 

Proposed   Charges

Heating

£8.51 per week

£7.97 per week

Warden Support Charge

£5.63 per week

£5.63 per week

Warden Management Charge

£2.81 per week

£4.94 per week

VCAS:

- Piper

- Communicall

 

£4.34 per week

£4.92 per week

 

£4.34 per week

£4.92 per week

Grounds Maintenance

£1.27 per week

£1.32 per week

Cleaning of   communal areas

£1.80 per week

£1.89 per week

Lighting of   communal areas

£1.16 per week

£0.96 per week

Laundry Facilities

£0.27 per week

£0.29 per week

Window Cleaning

£0.29 per week

£0.33 per week

Lift Maintenance

£1.44 per week

£0.83 per week

Door Entry

£1.31 per week

£1.18 per week

Intercom

£1.06 per week

£0.98 per week

CCTV

 

Sewerage Treatment   Plants

 

 

£318.45 per   annum     

£0.88 per week    

 

 Based on the Rateable     

      Value (RV) from the

     Welsh Water Schedule 2016/17

Cesspools

£0.00

Based on the   Rateable Value (RV) from the Welsh Water Schedule 2016/17

 

 

(5)       T H A Tthe changes to rents and service charges be implemented from 4 April, 2016 and that increase notices be sent to tenants 28 days in advance of the new charges coming into effect. 

 

Reasons for decisions

 

(1)       As required by statute.

 

(2)       In order that new rent levels are set within the specified Welsh Government (WG) guidelines.

 

(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.

 

 

Report to Cabinet