Agenda Item No.
The Vale of Glamorgan Council
Cabinet Meeting 17 December 2012
Joint Report of the Leader and the Cabinet Member for Housing, Building Maintenance and Community Safety
Housing Business Plan 2012
Purpose of the Report
1. To present the Housing Business Plan 2012 to Cabinet.
1 That Cabinet recommend the Housing Business Plan 2012 to Council for approval.
Reasons for the Recommendations
1 To obtain approval for the Housing Business Plan 2012.
2. The Welsh Government (WG) requires all local authorities who retain their housing stock to submit annually an acceptable Housing Business Plan that indicates a detailed financial forecast in the form of a 30 year financial model.
3. The Business Plan is the primary tool for a local authority’s housing landlord service and includes all assets within the Council’s Housing Revenue Account (HRA).
4. Submissions to WG must be made no later than 31 December 2012 which forms the basis of the Major Repairs Allowance (MRA) grant application, a pivotal financing component for the Housing Improvement Programme (to meet the Welsh Housing Quality Standard).
Relevant Issues and Options
5. The business model incorporates the most recent investment requirements based on the 2007 Stock Condition Survey conducted by Savills, adjusted for works carried out since that date.
6. Average rents have increased from £72.24 to £75.87 calculated on a 52 week basis. Rents are increased by inflation plus 1% from 2013/14 onwards in line with the notional rent guideline increase as per WG guidance.
7. The Major Repairs Allowance has increased from £2.7 million per year to £2.8 million per year. No inflation has been allowed for this grant.
8. All other Revenue income and expenditure is based on the 2012/13 revised budget plus inflation.
9. The provision for doubtful debts has been increased to allow for the negative impact of the welfare reform on rent collection. The Provision has been increased by £220,000 (real terms) which amounts to 1.4% of gross rental income. This figure was calculated by identifying the decrease in benefits anticipated for all those that will be adversely affected by the accommodations cap, and assuming that 50% of this shortfall could be a risk to the council in terms of uncollected rent. The sensitivity analysis explores the scenario of 100% of this shortfall in housing benefits impacting on rent collection. Taking this into consideration, the business plan is still viable.
10. An additional staffing budget has been included within the plan of £50,000 in year 12/13 and £100,000 (plus inflation) for each year after, until 2016/17. This budget will be used to fund staff to work with tenants providing them options to prevent them falling into arrears and/or becoming homeless as a direct result of the welfare reform.
11. Void days have increased due to the length of time taken to bring these properties up to WHQS (at the same time as void maintenance works). An additional sum of £160,000 has been included in both years 2013/14 and 2014/15 to account for the loss of rental income due to the delay. It is anticipated that void days will reduce and return to normal by 2015/16.
12. The latest projections are attached at Appendix H(i) and H(ii) to the Business Plan. These show a reduction in the total amount of prudential borrowing required over years 3 – 8 from £32.9 million to £32.4 million. However, the date anticipated that all prudential debt can be repaid is now 2031/32 (previously (2029/30).
13. A summary of the movement in the financial position is included in the table below.
Repayment of Debt
+ 2 years
Revenue Surplus in year 30
Sensitivity Analysis and Risk Analysis
14. One of the major risks to the Council is the impact of prudential (unsupported) borrowing which is required to ensure WHQS is met by April 2017. The costs of borrowing must be able to be met from the HRA, and it must be considered that any outstanding unsupported borrowing repayments would fall on the general fund should the housing stock transfer at any point in the future before the debt is repaid. The implications for this are set out in the business plan.
15. There are a number of risks associated with the assumptions used in the financial projections for the business plan. Some of the potential risks have been modelled to assess their impact on the viability of the business case. The results and relative risk assessments are shown in Appendix I and J to the plan.
16. The business case is most sensitive to the cessation or reduction of the Major Repairs Allowance. Sensitivities 6 and 7 explore this risk and whilst the Business Plan is still viable, the level of peak debt could be viewed by the Council as an unacceptable level of risk. In addition, the HRA Revenue surplus at year 30 is considerably reduced.
17. Possible changes to the financial regime that the Council operates will be a further risk to the Council. For instance, should changes be introduced to the rules on prudential borrowing, without which the Council could not achieve WHQS by April 2017. There is also still uncertainty with regard to the future of the HRA Subsidy System.
18. There are extensive monitoring and regulatory arrangements that govern the Council’s finances. In reality the council would take steps to avoid severe financial consequences and so the risks are consequently more likely to impact on the level of improvement to properties and level of service to tenants.
19. Leaseholders will be responsible for a proportion of costs of the improvement works (external works). There is a need for formal consultation as there are a set of stringent steps that need to be followed in order to ensure the costs of works are recouped by the Council. The process for consultation has commenced and all leaseholders have been issued the required formal notices in accordance with the Service Charges (Consultation Requirements)(Wales) Regulations 2004.
20. It is important to note that the Housing Business Plan assumes that capital and revenue works to Leasehold properties are recoverable from the leaseholder. It is therefore critical that a procedure is in place to minimise any recoverable costs.
21. The figures in the Housing Business Plan are based on current projections and if financial conditions should worsen then the level of investment proposed may not be achievable.
22. The total level of required Prudential Borrowing is £32.4m and the peak debt is £30.1m.
23. The Housing Revenue Account working balance at 1 April 2012 is £14.882m.
Sustainability and Climate Change Implications
24. The principles of sustainability run through the Housing Business Plan and the delivery of the Welsh Housing Quality Standard. Communities will be strengthened by having access to good quality housing in safe and secure environments. With regard to WHQs works, key performance indicators are in place to monitor contractors against community impact and environmental impact.
Legal Implications (to Include Human Rights Implications)
25. It is a legal requirement of the Welsh Government that each local authority produces a Business Plan and 30 year financial forecast describing how it will provide the investment to meet the Welsh Housing Quality Standard.
Crime and Disorder Implications
26. Many of the requirements of the WHQS contribute to the Crime and Disorder agenda, in particular, the requirements of safe and secure dwellings located in safe and attractive environments.
Equal Opportunities Implications (to include Welsh Language issues)
27. The Housing Improvement Programme improves the Council’s opportunities for assisting disadvantaged members of society.
28. Meeting the WHQS and the Housing Improvement Programme contributes to the Council’s corporate priority that Vale of Glamorgan residents have access to affordable, good quality suitable housing and housing advice and support.
Policy Framework and Budget
29. This report is a matter for approval by Cabinet.
Consultation (including Ward Member Consultation)
30. The Leader and Cabinet Member for Housing, Building Maintenance and Community Safety have been consulted.
Relevant Scrutiny Committee
31. Corporate Resources.
Vale of Glamorgan Business Plan (December 2012)
Welsh Government Letter - Major Repairs Allowance in Wales: Grant Application 2013/14 (23 November 2012)
Service Charges (Consultation Requirements)(Wales) Regulations 2004.
Nicola Monckton - Accountant
Sian Davies – Managing Director
Simon Davies – Operational Manager (Assets)
Jane Wade – Operational Manager Property
Martyn Lewis – Group Quantity Surveyor
Mike Ingram – Operational Manager Public Housing Services
Rob Lucas – Asset & Improvement Manager
Sian Davies – Managing Director