Agenda Item No. 11(c)
THE VALE OF GLAMORGAN COUNCIL
COUNCIL MEETING: 28 FEBRUARY 2018
REFERENCE FROM CABINET: 19 FEBRUARY 2018
C226 Final Housing Revenue Account (HRA) Budget Proposals 2018/19 (L) (Scrutiny Committee – Corporate Performance and Resources) -
Cabinet was asked to set the HRA budget for the financial year 2018/19 and to set the rents and service charges for the forthcoming rent year beginning on 2 April, 2018.
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 should be carried forward and had to be made good the following year.
Each local authority had to endeavour to have a working balance on the HRA, for any exceptional circumstances that may arise.
The basis for rent increases 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 had to also ensure a tenant’s rent was not increased by more than (CPI +1.5%) plus £2.00 per week.
The 2018/19 Policy for Social Housing Rents was issued by WG on 11 December, 2017 which included the 2018/19 rent bands and the maximum allowable uplift which had been outlined as CPI (as at September 2017) 3% plus 1.5% + £2.00, i.e. 4.5% + £2.00.
The initial HRA budget proposals were considered by Cabinet on 20 November, 2017 (Minute C141 refers). They were subsequently referred to the Homes and Safe Communities Scrutiny Committee on 6 December, 2017 who noted the proposals as did Corporate Performance and Resources Scrutiny Committee on 14 December, 2017.
Base Budget 2018/19
The Budget Strategy for 2018/19 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 2018/19 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 & 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.
- Contribution towards expenditure – This budget identified any contributions received from outside bodies or persons towards expenditure which had been incurred by the HRA.
- Grant Income – This budget related to revenue grant income received. From 2018/19 onwards the HRA would receive the Housing Finance Grant 2 (HFG2) from Welsh Government which supported new Council house building. The Council would take out a loan to fund capital expenditure and the HFG2 would be paid as an annual grant over a 30 year period and would be used to finance the interest and capital repayments of the debt.
In summary the change in the budget was itemised as follows:-
HRA
|
2017/18
Original Budget
|
Inflation /
Pay Award
|
Committed Growth / (Savings)
|
Rent / Income Increase
|
Increase / (Decrease) in CERA
|
2018/19
Proposed Budget
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
(131)
|
79
|
(453)
|
(562)
|
1,046
|
(21)
|
Inflation included an allowance of 2% pay awards in 2018/19 which amounted to approximately £53k.
The net saving of £453k was due to a number of factors;
- A decrease in Capital Financing charges of £301k in relation to unsupported borrowing being taken out in 2018/19 to fund the Housing Improvement Programme.
- A decrease in staff costs for vacant posts and staff changes of £65k.
- An increase of £43k in central recharges.
- A reduction in income of £76k, £60k of which was due to the cessation of Supporting People funding from October 17. The balance of which was due to reduced service charge income from tenants.
- A reduction in Premises costs of £123k.
- A reduction in Supplies & Services of £83k.
An increase in Capital Expenditure from Revenue Account (CERA) to finance the Housing Improvement Programme of £1,046k 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 £852k as at 31 March, 2019 which was broadly in line with the Housing Business Plan.
Proposed Increases in Rents
The Welsh Government 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 for 2018/19. 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. 4.5% plus £2.00).
It was usual practice that the Vale of Glamorgan Council only increased rent by an amount which would not breach the Housing Benefit Rent Rebate Limitation set by the Department of Work and Pensions (DWP). Breach of the limitation would mean that the HRA would be liable for a proportion of the additional increase. The draft limit, issued by Welsh Government, was not available at the time of writing.
It was proposed that rents were increased by 3% (the CPI element only) which was within the limit of 4.5% 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 Housing Business Plan commitments were achieved. The rent increase per property type was detailed below:-
HRA
|
Type
|
Present Target Rent for 2017/18
(Based on 50 Chargeable Weeks)
|
Proposed Average Rent Incr (+) / Decr (-)
(Based on 50 Chargeable Weeks)
|
Proposed Average Target Rent for 2018/19
(Based on 50 Chargeable Weeks)
|
|
Bungalow
|
£94.61 per week
|
+£2.84 per week
|
£97.45 per week
|
|
Flat
|
£82.63 per week
|
+£2.48 per week
|
£85.11 per week
|
|
House
|
£102.94 per week
|
+£3.10 per week
|
£106.04 per week
|
|
Maisonette
|
£90.29 per week
|
+£2.71 per week
|
£93.00 per week
|
|
TOTAL
|
£94.40 per week
|
+£2.83 per week
|
£97.23 per week
|
Proposed Increases in Other Charges
Garage Rents - The rent of freestanding garages was £7.58 per week. It was proposed that rent for all garages be increased by 3% to £7.81 per week. This percentage increase was in line with the rent increase.
Ty Iolo Hostel - The charge for persons accommodated was £169.59 per week. It was proposed that the weekly rent charge be increased by 3% to £174.68 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.
28 Evans Street, Barry - This property, owned by the Council, was let to Llamau Housing Trust and comprised of six units of accommodation. The weekly charge was £555.90. It was proposed that the charge be increased by 3% to £572.58 per week.
Temporary Accommodation - The average current weekly charge including additional management, utility and service charge costs was £167.80. It was proposed that the rent element be increased by 3%. The total charge would therefore be £172.84 per week.
Sheltered Housing Guest Suites - It was proposed that the charges for guest room facilities were increased by 3% to £13.08 per person per night for double occupancy and £18.69 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.
The following paragraphs outlined the main changes to the Service Charges. The proposed charges 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 £6.41 per week to £5.74 per week based on the actual costs incurred in the 12 months prior to the budgeting period.
Warden Housing Management Charge - The proposed new charge was £9.97 per week. This combined the previous two charges for Warden Management and Warden Support.
Cleaning of communal areas – The cost of cleaning communal areas had increased. It was proposed that the charge be increased from £2.02 per week to £2.31 per week based on the estimated costs for 2018/19.
Lighting of communal areas – The cost of providing lighting had increased. It was proposed that the charge be increased from £0.87 per week to £0.94 per week based on the actual costs incurred in the 12 months prior to the budgeting period
Lift Maintenance - The cost of lift maintenance had decreased, due to a reduction in the number of emergency call-outs. It was proposed that the charge be decreased from £0.92 per week to £0.48 per week based on the actual costs incurred in the 12 months prior to the budgeting period.
Sewerage Treatment Plants - The charge to owners of all purchased and private dwellings connected to Council owned and maintained treatment plants was currently £329.22 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 2018/19 issued by Dwr Cymru Welsh Water. The Welsh Water Schedule was not available at the time of writing.
Cesspool Emptying - The current charge of £6.35 per week was based on an equivalent rate to those properties connected to the main sewerage system. It was proposed therefore that these dwellings continued to be charged a rate equivalent to the Water Schedule 2018/19 issued by Dwr Cymru Welsh Water. Whilst the schedule was not available at the time of writing, the 2018/19 equivalent charge could be in the region of £6.60 per week.
Next Steps
The final budget proposals would be considered by Council at a meeting to be held on 28 February, 2018.
This was a matter for Executive and 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 2018/19 be recommended to Council as outlined below:-
|
|
Proposed Budget
2018/19
|
|
|
£’000
|
|
Expenditure
|
|
|
Supervision & Management
|
4,855
|
|
Repairs & Maintenance
|
4,043
|
|
Capital Financing Costs
|
4,977
|
|
Rent, Rates & Taxes & Other Charges
|
211
|
|
Increase in Bad Debt Provision
|
1,159
|
|
Capital Expenditure from Revenue Account (CERA)
|
4,585
|
|
|
|
|
Income
|
|
|
Dwelling Rents
|
(18,767)
|
|
Non Dwelling Rents
|
(170)
|
|
Interest
|
(3)
|
|
Charges for Services and Facilities
|
(537)
|
|
Contribution towards expenditure
|
(291)
|
|
Grant Income
|
(83)
|
|
(Surplus)/Deficit for the Year
|
(21)
|
|
Working Balance Brought Forward
|
(831)
|
|
Working Balance Carried Forward
|
(852)
|
(2) T H A T a rent increase of 3% (CPI) be approved and recommended to Council, as set out in paragraphs 15-17 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 18-31 of the report.
(4) T H A T The following charges for 2018/19 financial year be recommended to Council:-
|
50 Week Basis
|
Current Charges
|
Proposed Charges
|
|
Heating
|
£6.41 per week
|
£5.74 per week
|
|
Warden Support Charge
|
£5.63 per week
|
£0.00 per week
|
|
Warden Management Charge
|
£4.06 per week
|
£0.00 per week
|
|
Warden Housing Management Charge (above two charges combined into new charge)
|
£0.00
|
£9.97 per week
|
|
VCAS:
- Piper
- Communicall
|
£4.34 per week
£4.92 per week
|
£4.34 per week
£4.92 per week
|
|
Grounds Maintenance
|
£1.33 per week
|
£1.35 per week
|
|
Cleaning of communal areas
|
£2.02 per week
|
£2.31 per week
|
|
Lighting of communal areas
|
£0.87 per week
|
£0.94 per week
|
|
Laundry Facilities
|
£0.38 per week
|
£0.26 per week
|
|
Window Cleaning
|
£0.32 per week
|
£0.17 per week
|
|
Lift Maintenance
|
£0.92 per week
|
£0.48 per week
|
|
Door Entry
|
£0.75 per week
|
£0.73 per week
|
|
Intercom
|
£0.73 per week
|
£0.71 per week
|
|
CCTV
|
£0.84 per week
|
£0.90 per week
|
|
Sewerage Treatment Plants
|
£329.22 per annum
|
Based on the Rateable Value (RV) from the Welsh Water Schedule 2018/19
|
|
Cesspool Emptying
|
£317.50 per annum
|
Based on the Rateable Value (RV) from the Welsh Water Schedule 2018/19
|
(5) T H A T all changes to rents and service charges be implemented from 2 April, 2018 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.
[View Cabinet Report]