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Agenda Item Nos. 4 & 5

 

THE VALE OF GLAMORGAN COUNCIL

 

SCRUTINY COMMITTEE (CORPORATE RESOURCES): 8TH NOVEMBER, 2011

 

SUPPLEMENTARY INFORMATION - REFERENCE FROM THE SCRUTINY COMMITTEE (HOUSING AND PUBLIC PROTECTION): 2ND NOVEMBER, 2011.

 

 

“           DRAFT HOUSING BUSINESS PLAN 2011 (REF) AND HOUSING BUSINESS PLAN - UPDATE (DFICTP AND DLPPHS) -

 

The Chairman agreed that agenda items 5 and 6 for consideration by the Committee be considered jointly given the relevance of the information. 

 

The Cabinet, at its meeting held on 19th October 2011, had considered a draft Housing Business Plan 2011.  The Cabinet at that time had received a detailed and comprehensive report which set out the Council’s arrangements in regard to a revised Business Plan which included a detailed financial forecast in the form of a 30 year financial model.  That report also included changes made to the base model assumptions contained within the Plan including the latest financial projections in regard to the financial detail of the Plan and associated sensitivity analysis and risk assessment. 

 

The Cabinet having considered the matter subsequently resolved:

 

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

 

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

 

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

 

(4)       T H A T the Housing Business Plan be brought back to Cabinet following consultation.

 

Reasons for decisions

 

(1)       To update the draft Business Plan with the latest available information.

 

(2)       To provide opportunity for comment from the Scrutiny Committees.

 

(3)       To seek the views of tenants.

 

(4)       To report the proposed final Housing Business Plan prior to its submission to Council.”

 

In conjunction with the above, the Head of Housing Services had submitted an update report for consideration by the Scrutiny Committee which set out detailed information in regard to changes to the base model of the Housing Business Plan which had been revised and incorporated the most recent investment requirement as identified by Savills who were commissioned to revisit the Stock Condition Survey.  In addition, the draft Housing Business Plan had been adjusted accordingly to reflect “stock-sensitive” items as well as the Welsh Housing Quality Standard work which had been undertaken subsequent to the Condition Survey. 

 

In commenting on the detail of the report the Head of Housing indicated that the Council aimed to achieve the WHQS for all its dwellings by the year 2016/17.  This was for reasons of affordability and an assessment of the availability of the professional and construction resources required to deliver the substantial programme of works.  He indicated that between now and March 2017 the Business Plan was modelled on a total capital investment of £80m. in monetary terms and a further £136m. would be spent on years 7 -30 in maintaining the WHQS.  In total this represented a total outlay of circa £215m. over the life of the 30 year Plan.  The above levels of investment would be reliant on the Major Repairs Allowance (MRA) funding from the Welsh Government and also the Council utilising its own resources i.e. useable capital receipts and revenue contributions to fund the expenditure. 

 

A financial analysis had been carried out on the Council’s ability to achieve the level of investment required and specified above whilst maintaining a viable Housing Revenue Account.  A number of assumptions had been used in the financial modelling, the main assumptions being namely:

 

·                    Inflation - 2% (based on the UK government inflation target) as specified in Welsh Government Housing Determination.

·                    Stock level at 1st April 2011 - 3,946 dwellings.

·                    Minimum level of Balances to be maintained, this being set at £600,000 (real terms) which approximates to 5% of gross expenditure.  This was considered to be a prudent level for HRA surplus balances.

·                    Supervision and Management costs - based on 2011/12 budget, costs associated to these to rise with inflation.

·                    Revenue repairs fixed at a total cost of £3,000,000 for 2011/12 budget.  Reducing to £2,400,000 after 2016/17 when the major internal and external works had been completed, again costs to rise in line with inflation target.

·                    Average rents at £72.24 per week in 2011/12 calculated on a 52 week basis, increasing by inflation plus 1% per annum as per notional rent increases advised by the Welsh Government for Housing Subsidy purposes.

·                    HRA Subsidy variables with the management and maintenance allowance being adjusted accordingly to ensure that the total HRA Subsidy increased no more than inflation on a year to year basis.  The Business Plan had therefore assumed a 2% increase in subsidy year on year.

·                    Other Revenue Income and Expenditure being based on the 2011/12 budget and included additional items with figures based on today’s prices and uplifted at the rate of inflation in the Business Plan.

·                    The Plan was no longer reliant on Right-To-Buy sales as it had been assumed that no further Right-To-Buy sales would occur for the life of the Plan.

·                    The use of useable capital receipts - Year 1 (2011/12) £1,751,314; Year 2 (2012/13) £378,511; Year 3 (2013/14) £246,175; Year 5 (2015/16) £385,707; and Year 6 (2016/17) £376,932.

·                    Expected Penarth Heights HRA Useable Capital Receipts over the period Year 1 to Year 6 to total £1,287,325.

·                    Estate Improvements - an allowance of £50,000 per annum for years 2 to 6 had been set aside to improve the safety of estates through community safety initiatives such as fencing, street lighting, landscaping or for play equipment for young people and tenants, community groups and individuals could approach the Council to access such funding to make such improvements.

·                    Other Capital Spend in regard to allowances for Disabled Adaptations: further investment in regard to Ty Iolo Hostel, Barry and Evans Street Hostel, Barry and temporary accommodation.

·                    Assumption that the Major Repairs Allowance grant would remain at £2.7m. per annum for the life of the 30 year Plan. 

 

To summarise, the Head of Housing indicated that the Council could meet and maintain a minimum WHQS by the end of the financial year 2016/17, whilst still maintaining a surplus revenue balance over a 30 year period.  The total amount of borrowing to achieve this was £32.02m. Prudential (unsupported) borrowing and it was anticipated that the Authority could repay any outstanding debt by 2028/29 which was a period considerably earlier than previously planned for in earlier editions of the Plan.  

 

The 2011/12 HIP budget would be regularly monitored and discussed at programme meetings to ensure that the programme remained on target with work being undertaken on the following improvement programme:

 

 

Amended

Budget

£

Public Sector Housing

Housing Improvement Programme

 

Windows, doors and door entry systems

775,000

Elec and Smoke Alarm Testing, Rewiring, etc.

100,000

Central heating and Boiler Renewals

2,000,000

Redlands House Improvements

30,000

Sheltered Scheme Boilers

200,000

Hafan Treharne Hostel Improvements

270,000

Roof Renewals

1,115,000

Council Housing Adaptations

490,000

Total Housing Improvement Programme

4,980,000

 

In addition to the above, the Housing Works represented a significant programme and the following chart provided a breakdown of the number of kitchens, bathrooms and boilers etc. that would be delivered over the five year period up to the end of the financial year 2016/17:

 

 

Total No.

2012/13

2013/14

2014/15

2015/16

2016/17

Kitchens

3,600

360

810

810

810

810

Bathrooms

3,200

320

720

720

720

720

Boilers

3,100

310

698

698

698

698

Heating Systems

2,500

250

563

563

563

563

Rewiring

3,300

330

743

743

743

743

Roofs

1,400

140

315

315

315

315

 

The Head of Housing further indicated that most of the above works would be delivered through four main contracts operating within four Improvement Areas already determined by the Cabinet.  These were the Rural Vale; Barry split into two areas and Penarth / Dinas Powys.  A set amount of work within each of the areas would be retained from the main contracts for the in-house DLO to deliver.  It was expected that the tendering exercise in respect of this would be expedited in early December 2011 with tenders being returned during April 2012 with a view to appointing contractors to undertake works during May / June 2012. 

 

In referring to the sensitivity analysis undertaken regarding risk, the Head of Housing indicated there were risks that the assumptions used in the Housing Business Plan did not materialise e.g.

 

·                    inflation running at 1% higher than anticipated over the life of the Business Plan i.e. 3%;

·                    the cost of home improvements increased by 1% above inflation during Years 1 to 7, this included both revenue repairs and major investment;

·                    the cost of the improvements and repairs increased by 1% above inflation per annum for the life of the Plan;

·                    or interest rates were 1% higher than expected;

·                    the annual Major Repairs Allowance from Welsh Government was half that anticipated i.e. £1.3m. per annum; the annual Major Repairs Allowance (MRA) from WG was for Years 1 to 7 only;

·                    interest rates 2% higher for Years 4, 5 and 6 than assumed and rent increases were 0.5% less than assumption made within the Plan.

 

Having regard to the above and related issues it was

 

RECOMMENDED -

 

(1)       T H A T the reference received from Cabinet dated 19th October, 2011 regarding the above subject be noted.

 

(2)       T H A T the changes to the draft Housing Business Plan as set out in the report to the Cabinet of 19th October and as outlined by the Head of Housing Services in his update report be noted.

 

(3)       T H A T the minute of this Scrutiny Committee be referred to the Scrutiny Committee (Corporate Resources) for consideration.

 

Reasons for recommendations

 

(1)       In acknowledgement of the matter being referred to the Scrutiny Committee by the Cabinet.

 

(2)       In acknowledgement of work undertaken in respect of a revised Housing Business Plan and action to progress the same.

 

(3)       As the lead Scrutiny Committee.”

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