Report of the Deputy Chief Executive and City Treasurer, Strategic Director (Development) and Strategic Director (Neighbourhoods).

This report presents members with an update on the ongoing work being undertaken to finalise the 2023/24 Housing Revenue Account (HRA) budget, the final proposed budget will be brought back to Members in March as part of the overall Council budget approvals.

The committee considered a report of the Deputy Chief Executive and City Treasurer, Strategic Director – Growth and Development and Strategic Director – Neighbourhoods which provided an update on the ongoing work being undertaken to finalise the 2023/24 Housing Revenue Account (HRA) budget. The final proposed budget would be brought back to Members in March as part of budget approvals.

The report also outlined the current assumptions for the 2023/24 HRA budget and the impact of the proposals on both the HRA and tenants, given the current economic climate and cost-of-living pressures.

Key points and themes within the report included:

·         The HRA is a ring-fenced account and must, in general, balance on a year-to-year basis, so that the costs of running the Housing Service, can be met from HRA income;

·         The Government stipulates that registered providers may not increase rents by more than Consumer Price Inflation (at September of the previous year) plus one percentage point in any year, although the Chancellor of the Exchequer announced in the November 2022 Autumn Statement that social housing rents would be capped at an increase of no more than 7% due to current high inflation rates.

·         HRA reserves are forecast to be around c£90m at the end of the current financial year (2022/23) and are forecast to reduce to around £44m by 2026/27;

·         As of October 2022, the HRA is forecasting that expenditure for the current year will be £17.7m higher than income and this would be funded through the use of reserves

·         The HRA budget was being modelled on the basis of a 7% rent increase to all tenants with effect from April 2023 and if this increase is approved by members, it would produce an average weekly rent (based on 52 weeks) of:

o   General Needs £83.88 (£5.49 increase)

o   Supported Housing £76.45 (£5.00 increase)

o   PFI Managed £98.15 (£6.42 increase)

·         Housing benefit levels had not been capped and any approved rent increase would be covered in full for those residents in receipt of 100% Housing Benefit entitlement or Universal Credit (housing element).

The key points and queries which arose from the committee’s discussions included:

• Whether the government would fund the difference between the 7% rent cap and 11.1%, which would have been the proposed increase had the rent cap not been applied;
• Work undertaken to mitigate inflationary pressures and ‘bad debt’, including non-payment of rent;
• The extra work required to address voids and issues with damp and mould in properties;
• Whether any flexibility was built into the budget regarding heat charges, given that the energy price cap will end in March 2023;
• How the Council was ensuring deliverability on the contract with Equans, who were commissioned to bring voids back into use;
• Seeking clarification as to whether the Council had assumed an annual 3% rent increase from 2024/25 onwards;
• Types of hardship funds and cost-of-living support provided by other Registered Providers in Manchester;
• Residents’ views on the level of voids in Manchester, and whether there were any particular “hotspots” for these;
• The viability of the Right to Buy scheme, and the impact this has on the Housing Revenue Account;
• Emphasising that the 7% rent cap is a limit and not a requirement, and that a 7% rent increase would have a significantly detrimental impact on many Manchester families.

In introducing the report, the Executive Member for Finance and Resources explained to the committee that a decision was still to be taken on the Council’s rent increase for 2023/24. He explained that the government had undertaken a consultation on whether to impose a rent cap of either 3%, 5% or 7%, which contrasted with the national rent policy which allowed social housing rents to be increased by up to the consumer price index (CPI) plus 1% and would have meant next year’s rents increasing by 11.1%.

He advised that a 7% cap had been imposed but acknowledged the inflationary pressures facing the Housing Revenue Account, which was required to balance for a 30-year period.

The Executive Member for Finance and Resources also confirmed that the government would not fund the difference between the 7% rent cap and the 11.1% based on CPI.

The Head of Finance for Corporate Core and Strategic Development advised that a provision of 1% per annum based on rental income had been built into the business plan for bad debts and this would be kept under review. However, previous experiences indicated that concerns over the introduction of Universal Credit leading to an increase in non-payment of rent were unfounded and this was largely due to work undertaken by Northwards previously and the Council presently in building relations with tenants and promoting early intervention.

The Director of Housing Operations explained that removing damp and mould was part of the Council’s repairs programme and that this had been prioritised lately given recent events surrounding the death of a child due to mould in social housing elsewhere in the country.

In response to a member query around heating charges, the Head of Finance for Corporate Core and Strategic Development explained that the previous year’s budget included a 20% cap for heating charges and increases in the Ofgem price cap and heating charges had resulted in an in-year deficit within the HRA. Officers were working through the impact of this for 2023/24 and this would be brought back to the committee in February 2023 as part of the budget approval process.

Regarding the work of Equans, members were advised that the contract began in April 2021 with 6500 outstanding repairs jobs, of which 2000 remained. The number of voids had decreased from 260 at the commencement of the contract to 178, and a plan had been devised for March and April 2023 to get the number of voids back to the pre-pandemic figure.

Assurances were provided by both the Executive Member for Housing and Development and the Director of Housing Operations that the Council was doing all it could within the current contract to reduce the number of voids and outstanding repairs sand to ensure value-for-money for residents and the HRA.

The Head of Finance for Corporate Core and Strategic Development clarified that calculations of the surplus and deficit of the HRA’s 30-year business plan were based on implementing either a 3%, 5% or 7% increase in 2023/24 and reverting to usual practice of an increase based on CPI plus 1% in subsequent years.

The Head of Strategic Housing also committed to providing additional information on the types of hardship funds and cost-of-living support provided by other Registered Providers in Manchester following the meeting.

In response to members’ queries around residents views on the number of voids, the Executive Member for Housing and Development explained that the Housing Advisory Board had undertaken a ‘deep dive’ into the issue of voids at its last meeting and residents expressed strong views on the issue. He emphasised the moral responsibility of the Council in helping those in temporary accommodation and on the housing register. The Director of Housing Operations also advised that engagement had been undertaken with residents during the summer with over 500 responses as to what residents wanted from the service. Many comments were centred around increased visibility in the community and repairs.

It was noted that hotspots for voids could be identified by tenure type, particularly around older stock. The Executive Member for Housing and Development endeavoured to look into geographical hotspots and provide an update to members.

The Head of Finance for Corporate Core and Strategic Development provided assurances around the impact of the Right to Buy scheme on the HRA and explained that assumptions on housing stock were built into the 30-year business plan. It was noted, however, that expenditure would need to be reduced to offset any reduction in rent income as a result of residents utilising the scheme. The Executive Member for Housing and Development also highlighted the Council’s progress in building more social housing to offset any reductions and expressed his desire for the Right to Buy scheme to be either scrapped or fundamentally reformed to ensure financial sustainability.

The Executive Member for Finance and Resources recognised the hardships which residents were facing and urged residents to take advantage of the Hardship Fund offered by the Council.

Decision:

That the report be noted.