Report of the Strategic Director (Growth and Development), Strategic Director (Neighbourhoods) and Deputy Chief Executive and City Treasurer 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 2024/25 and indicative budgets for 2025/26 and 2026/27.

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 was 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 original approved gross HRA budget was £117m and included a £35.5m revenue contribution towards the £60.4m capital programme. The HRA is currently forecasting an overspend of £4.094m made up of

·            Higher than forecast costs of repairs and maintenance of £8.764m. 

·            Other smaller overspends amount to £0.605m

This was offset by additional interest earned on balances due to increasing interest rates (£1.860m) and reductions in the budget allocated to PFI sprinkler works which were now funded from capital receipts (£2.089m).  Other net underspends  accounted for of £1.326m (including £1.038m reduced costs of gas because of a combination of reduced consumption, and reductions in wholesale gas prices). 

The reduction in the capital programme forecast outturn also meant that the budgeted £11.88m of revenue contribution to capital outlay (RCCO) was not required. This was to be funded in part from a transfer in of revenue reserves of £22.808m as set out in the original approved budget. This transfer would not be required until 2024/25.

In previous years the Government’s formula rent guidance assumes that rents increase by up to CPI plus 1%. The CPI rate used was based on the September figure in the preceding year, and as at September 2023 CPI was 6.7%.  This HRA budget had been prepared in line with the formula rent of 7.7% to all tenants, with effect from April 2024

Based on these increases, the average weekly rent (based on 53 weeks) would be:

·                General Needs                   £90.12 (£6.44 increase)

·                Supported Housing             £82.34 (£5.89 increase)

·                PFI Managed                      £109.78 (£7.85 increase)

In line with Manchester’s Anti-Poverty Strategy and support for residents during the ongoing cost of living crisis it was proposed that the community living fund was retained for 2024/25, at £300k.

To ensure that the increase applied to garage rents remained in line with that applied to dwelling rents, it was proposed that 2024/25 garage rents be increased in line with the original rent formula of 7.7%. The impact of this increase was:- 

Other income is forecasted to be c.£2.072m in 2024/25 and it was assumed that the majority of these budgets were uplifted by the forecast 4% inflation for 2024/25. In most cases there were separate lease arrangements for these premises and the rents were subject to increases in line with the lease conditions

The Council continued to own and manage c.15,000 properties within the HRA under various arrangements.  In the 2023/24 financial year Right to Buy Sales (RTB) were lower than the peak of 233 properties in 2022/23, in the aftermath of the pandemic. Sales of around 136 properties (c.1% of stock numbers) were forecast in the current year.  The budget assumed ongoing 1% RTB sales per annum.  This would reduce the level of rent income achieved and the number of sales would continue to be closely monitored.  The current business plan did not assume that these assets were replaced within the HRA, and based on current assumptions there would be c11,300 properties at the end of 30 years unless a proactive strategy of replacement was adopted

As part of the HRA business plan it had always been the intention that tenants' heating charges were set to reflect the actual costs of delivering heat, this includes the costs of gas consumed, and costs of infrastructure maintenance to deliver heat.  It was proposed to change the tariffs to residents in line with the price cap as set by Ofgem from 1 April 2024 (forecasted at £1,620), and mirror the Ofgem price cap going forward.  This would ensure that the charges were comparable with other residents who were not in communal heating schemes.  In calculating the charges based on the forecast Ofgem price cap the overall average charge would be £723 per annum, which was £14.46 per week. The average charge for residents paying via heating debits will be £18.86 per week and for residents paying by Point of Sales will be £12.28 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 2024/25 and indication of the 2025/26 and 2026/27 budgets had also been considered by the Resources and Governance Scrutiny Committee at its February 2024 meeting where the committee had noted the proposals in the report (Minute RGSC/24/17).

Decisions

The Executive

(1)          Note the forecast 2023/24 HRA outturn as set out in section 4 of the report.

(2)          Approve the 2024/25 HRA budget and note the indicative budgets for 2025/26 and 2026/27.

(3)          Approve the proposed 7.7% increase to dwelling rents and 7.7% 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 2024/25 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 2024/25 changes for communal heating charges and approve the change in policy so that charges are in line with the price cap as set by Ofgem from 1st April 2024, and mirror the Ofgem price cap going forward