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

A joint report by the Strategic Director (Growth and Development), the Strategic Director (Neighbourhoods) and the Deputy Chief Executive and City Treasurer presented the proposed budget for the Housing Revenue Account (HRA) for 2023/24 and indicative budgets for 2024/25 and 2025/26.

The report set out the requirements placed on the Council with respect to the HRA budget:-

·                     The Council had to formulate proposals or income and expenditure for the financial year which sought to ensure that the HRA would not show a deficit balance;

·                     To keep a HRA in accordance with proper practice to ensure that the HRA is in balance taking one year with another; and

·                     The HRA must, in general, balance on a year-to-year basis so that the costs of running the Housing Service must be met from HRA income.

The HRA Budget Position for 2022/23, which as of December 2022, was forecasting that net expenditure would be £14.940m higher than income, which would need to be funded by the additional use of reserves to that planned.  In effect the HRA was forecasting an overspend of £1.752m and the main reasons for in year changes were detailed in the report.

Government guidance allowed Local Authorities to increase rents by a maximum of CPI plus 1% for the five-year period 2020/21 to 2024/25. The CPI rate used was based on the September figure in the preceding year, and as at September 2022 CPI was 10.1%.  However, the cost-of-living crisis had resulted in the Government launching a consultation exercise around the level at which the rent cap should be set at in 2023/24.  The Government had since advised that the maximum social rent increase would be capped at 7%, with an exception for properties within PFI contracts, where the standard PFI unitary charges are contractually linked to inflation measures.  Therefore, this report sought approval to increase tenants’ rents for all properties by 7% from April 2023 except PFI properties, where standard increase of CPI +1% (11.1%) was proposed, also in line with Government policy.

Whilst the cap on rents is welcomed from a tenant’s perspective, there was no cap applied in respect of inflationary impacts on expenditure incurred by the HRA and the 7% increase (11.1% for properties managed under PFI contracts) would result in c£2.0m less rental income in 2023/24 and c£78m over the life of the 30-year business plan, which would mean £78m less to invest into the estate over that time.

In light of the current economic climate and the potential impact the proposed rent and heating charge increase may have on the most vulnerable tenants it was proposed that the hardship fund was increased from the initial £200k provided in 2022/23 to £1m in 2023/24. This fund would provide targeted support to those most affected by the cost-of-living crisis.

In light of the current economic climate and the potential impact the proposed 7% rent increase might have on the most vulnerable tenants it was proposed that £200k was earmarked to provide a hardship fund to provide targeted support to those most affected by the increase in living costs, the proposed rent increase and the ongoing impacts of COVID.  In addition to the hardship fund, it was also noted that the proposed 7% rent increase would be covered in full for those residents in receipt of 100% housing benefit entitlement and tenants in receipt of universal credit would also be partially protected from the impact of any increase in rents

To ensure that the increase applied to garage rents remained in line with that applied to dwelling rents, it was proposed that 2023/24 garage rents be increased in line with the original rent formula or 11.1%by 4.5%, which would see an increase in the rental of between 0.22p and 0.56p per week.

The report also explained the other key changes in the HRA budget for 2023/24, and the full budget was presented as set out below.-

It was noted that the proposed HRA budget 2023/24 and indication of the 2024/25 and 2025/26 budgets had also been considered by the Resources and Governance Scrutiny Committee at its February 2023 meeting where the committee had noted the proposals in the report (Minute RGSC/23/10).

Councillor Leech raised his concern in relation to increasing rental costs for those residents that were on District Heating Schemes as in previous years they had been given a subsidy towards their energy costs.

Decisions

The Executive

(1)          Note the forecast 2022/23 HRA outturn as set out in section 4 of the report.

(2)          Approve the 2023/24 HRA budget and note the indicative budgets for 2024/25 and 2025/26.

(3)          Approve the proposed 7% increase to dwelling rents and 11.1% increase in Garage rents, and delegate the setting of individual property rents, to the Director of Housing Operations and the Deputy Chief Executive and City Treasurer, in consultation with the Executive Member for Housing and Development and the Executive Member for Finance and Human Resources.

(4)          Approve the proposal that the Council continues with the policy of where the 2023/24 rent is not yet at the formula rent level, the rent is revised to the formula rent level when the property is re-let.

(5)          Note the proposed 2023/24 changes for communal heating charges and approve the change in policy so that charges can be aligned with the Ofgem price cap over the following financial year in a phased approach and adjusted in line with any change to the Ofgem price cap once alignment has been reached thereafter.

(6)          Approve a proposed £1m support fund to support residents and tenants with increased costs of both rent and heating charges. 

(7)          Approve the proposed 2023/24 Housing Operations revenue budget.