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Agenda Item No. 10(e)

 

THE VALE OF GLAMORGAN COUNCIL

 

COUNCIL MEETING: 1 MARCH 2017

 

REFERENCE FROM CABINET:  20 FEBRUARY 2017

 

C3470         FINAL HOUSING REVENUE ACCOUNT (HRA) BUDGET PROPOSALS 2017/18 (L) (SCRUTINY COMMITTEE – HOMES AND SAFE COMMUNITIES) -

 

Cabinet was asked to set the Housing Revenue Account (HRA) budget for the financial year 2017/18 and to set the rents and service charges for the forthcoming rent year beginning on 3 April, 2017.

 

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 had to 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 that 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 had to be carried forward and made good the following year.

 

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

 

The basis of rent increase was set by the WG 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 £2.00 per week.

 

The 2017/18 rent bands for each local authority were issued by Welsh Government (WG) on 20 December, 2016 and the agreed increase was CPI (as at September 2016) 1% plus 1.5% + £2.00, i.e. 2.5% + £2.00 as laid out in the new rent policy.

 

The initial HRA budget proposals were considered by Cabinet on 14 November, 2016 (minute C3364 refers). They were subsequently referred to the Homes and Safe Communities Scrutiny Committee on 7 December, 2016, who noted the proposals as did Corporate Performance and Resources Scrutiny Committee on 13 December, 2016.

 

Base Budget 2017/18

 

The Budget Strategy for 2017/18 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.

 

It was anticipated that the 2017/18 draft 30-year Housing Business Plan would be reported to Cabinet during March 2017, once the latest guidance had been received from Welsh Government. The Plan would also require Council approval.

 

The proposed 2017/18 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.
  • Repairs and Maintenance - This budget related to the revenue repairs and maintenance service for the Council Housing Stock.
  • Capital Financing Costs - 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 the net 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:-

 

2016/17

Original   Budget

Inflation   /

Pay   Award

Committed   Growth / (Savings)

Rent   Increase

Increase/   (Decrease) in CERA

2017/18

Proposed   Budget

£000

£000

£000

£000

£000

£000

(22)

136

(232)    

(621)

608

(131)

 

 

 

 

 

 

Inflation included an allowance of 1% pay awards in 2017/18. 1% increase in pay amounts to approximately £26k.

 

The net saving of £232k was due to a number of factors; 

  • A decrease in Capital Financing charges of £28k in relation to unsupported borrowing being taken out in 2017/18 to fund the Housing Improvement Programme.
  • An increase in staff costs for increments and staff changes of £79k.
  • A reduction of £290k in central recharges.
  • A reduction in the cost for Council Tax at void properties of £67k.
  • An increase in the revenue repairs costs of £185k.
  • Various other minor savings of £111k.

An increase in Capital Expenditure from Revenue Account (CERA) to finance the Housing Improvement Programme of £608k 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 £831k as at 31 March, 2018 which was in line with the draft Housing Business Plan. The minimum level of the HRA Reserve had been re-assessed from the £600k included in the previous plan. The revised level was equivalent to approximately 5% of revenue and capital expenditure, excluding any new build development costs. 5% was a generally accepted percentage used for assessing levels of reserves to be held.

 

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 fell 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 £2.00 (i.e. 2.5% plus £2.00). If the Vale of Glamorgan applied a 2.5% 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. The current rent for the Vale of Glamorgan was within the draft limit issued by Welsh Government.

 

It was proposed that rents were increased within the limit of 2.5% plus the maximum of £2.00 and had been set in line with our 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 draft Housing Business Plan commitments was achieved. The rent increase per property type was detailed below:-

 

  Type

Present Target Rent for 2016/17

 

 

(Based on 50 Chargeable Weeks)

 

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

 

(Based on 50 Chargeable Weeks)

Proposed Average Target Rent for 2017/18

 

(Based on 50 Chargeable Weeks)

 

Bungalow

£91.41 per week

+£3.20 per week

£94.61 per week

Flat

£79.84 per week

+£2.79 per week

£82.63 per week

House

£99.47 per week

+£3.47 per week

£102.94 per week

Maisonette

£87.24 per week

+£3.05 per week

£90.29 per week

TOTAL

£91.21 per week

+£3.19 per week

£94.40 per week

 

Proposed Increases in Other Charges

 

Garage Rents - The rent of freestanding garages was currently £7.32 per week. It was proposed that rent for all garages be increased by 3.5% to £7.58 per week. The percentage increase was broadly in line with the rent increase.

 

Ty Iolo Hostel - The current charge for persons accommodated was £163.50 per week. It was proposed that the weekly rent charge be increased by a maximum of 2.5% + £2.00 to £169.59 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 the WG recommended rent increase.

 

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 £540.39. It was proposed that the charge be increased by a maximum of 2.5% + £2.00, in line with the recommended increase for the Hostel. The weekly charge would therefore be £555.90 per week.

 

Temporary Accommodation - The average current weekly charge including additional management, utility and service charge costs was £161.76. It was proposed that the rent element be increased by a maximum of 2.5% + £2.00 in line with the WG recommended guideline increase. The total charge would therefore be £167.80 per week.

 

Sheltered Housing Guest Suites - It was proposed that the charges for guest room facilities be increased by 3.5% to £12.70 per person per night for double occupancy and £18.15 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 during 2017/18.

 

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 £7.97 per week to £6.41 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 £4.06 per week, and the proposed charge for the Warden Support element was £5.63 per week.

 

Lift Maintenance - The cost of lift maintenance had increased, due to an increase in the number of emergency call-outs. It was proposed that the charge be increased from £0.83 per week to £0.92 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 £1.18 per week to £0.75 per week based on the actual costs incurred in the 12 months prior to the budgeting period. The cost of providing the Intercom systems had also decreased from £0.98 per week to £0.73 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 the dwellings continued to be charged at a similar sewerage rates to the Water Schedule 2017/18 issued by Dwr Cymru Welsh Water. The Welsh Water Schedule was not available at the time of writing.

 

Cesspool Emptying - The current charge of £6.23 per week was based on an equivalent rate to those properties connected to the main sewerage system. It was proposed therefore that the dwellings would continue to be charged t aa rate equivalent to the Water Schedule 2017/18 issued by Dwr Cymru Welsh Water. Whilst the schedule was not available at the time of writing, the 2017/18 equivalent charge could be in the region of £6.35 per week.

 

Cabinet's final budget proposals would be considered by Council at its meeting to be held on 1 March, 2017.

 

This was a matter for Council decision

 

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

 

RESOLVED –

 

(1)          T H A T The final HRA budget proposals for 2017/18 as outlined below be recommended to Council :-

 

 

Proposed Budget

2017/18

 

£’000

Expenditure

 

Supervision & Management

4,967

Repairs and Maintenance

4,043

Capital Financing Costs

5,278

Rent, Rates & Taxes &   Other Charges

227

Increase in Bad Debt Provision

1,104

Capital Expenditure from   Revenue Account (CERA)

3,539

 

 

19,158

Income

 

Dwelling Rents

(18,487)

Non Dwelling Rents

(187)

Interest

(4)

Charges for Services and   Facilities

(611)

 

 

(19,289)

(Surplus)/Deficit for the   Year

 

(131)

Working Balance Brought   Forward

(700)

Working Balance Carried   Forward

(831)

 

(2)       T H A T rent increase of 2.5% plus up to a maximum of £2.00 be approved and recommended to Council, as set out in paragraphs 16-18 of the report.

 

(3)      T H A T the increase suggested for other services be approved and recommended to Council, as set out in paragraphs 19-31 of the report.

 

(4)      T H A T The following charges for 2017/18 financial year be recommended to Council:-

 

50 Week Basis

 

Current Charges

 

Proposed Charges

 

Heating

 

£7.97 per week

 

£6.41 per week

 

Warden Support Charge

 

 £5.63 per week

 

£5.63 per week

 

Warden Management Charge

 

£4.94 per week

 

£4.06 per week

 

VCAS:

- Piper

- Communicall

 

 

£4.34 per week

£4.92 per week

 

 

£4.34 per week

£4.92 per week

 

Grounds Maintenance

 

  £1.32 per week

 

£1.33 per week

 

Cleaning of communal areas

 

£1.89 per week

 

£2.02 per week

 

Lighting of communal areas

 

£0.96 per week

 

£0.87 per week

 

Laundry Facilities

 

£0.29 per week

 

£0.38 per week

 

Window Cleaning

 

£0.33 per week

 

£0.32 per week

 

Lift Maintenance

 

£0.83 per week

 

£0.92 per week

 

Door Entry

 

£1.18 per week

 

£0.75 per week

 

Intercom

 

£0.98 per week

 

£0.73 per week

 

CCTV

 

£0.88 per week  

 

£0.84 per week

 

Sewerage Treatment Plants

 

£318.45 per annum

 

Based on the Rateable Value (RV) from the   Welsh Water Schedule 2017/18

Cesspool Emptying

£6.23 per week

Based on the Rateable Value (RV) from the   Welsh Water Schedule 2017/18

 

(5)       T H A T all changes to rents and service charges be implemented from 3 April, 2017 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 were set within the specified Welsh Government (WG) guidelines.

 

(3)       In order that charges were approved for the coming year.

 

(4)       In order that charges were approved for the coming year.

 

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

 

 

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