Agenda item

Report from the Strategic Director of Adult Care, Housing and Public Health.

 

Recommendations:

 

That Cabinet recommends to Council to: -

 

1.    Approve the proposed 2025/26 Base Case Option 2 for the HRA Business Plan.

2.    Note that the Business Plan will be reviewed annually to provide an updated financial position.

3.    Agree that Council dwelling rents are increased by 2.7% in 2025/26 (Option 2).

4.    Agree that the Council should retain the policy of realigning rents on properties at below formula rent to the formula rent level when the property is re-let to a new tenant.

5.    Agree that shared ownership rents are increased by 3.2% in 2025/26.

6.    Agree that charges for communal facilities, parking spaces, cooking gas and use of laundry facilities are increased by 2% in 2025/26.

7.    Agree that charges for garages are increased by 10% in 2025/26.

8.    Agree that the District Heating unit charge per Kwh is set at 13.09 pence per kwh.

9.    Agree that the decision to reduce the price of District Heating Charges further during 2025/26 be delegated to the Assistant Director of Housing in conjunction with the Assistant Director of Financial Services following consultation with the Cabinet Member for Housing. The delegation would only be used to respond to a change in Government policy or a significant change in the Ofgem price cap that has the effect of necessitating a lower unit price.

10.Approve the draft Housing Revenue Account budget for 2025/26 as shown in Appendix 6.

 

 

The Chair welcomed Councillor Allen, Cabinet Member for Housing and James Clark, Assistant Director for Housing to introduce the report.

 

The Cabinet Member for Housing stated the Housing Revenue Account (HRA) was a self-financing, ring-fenced account which retained and used the housing rental income to fund on-board services, deliver the capital programme and invest in new housing.  The HRA business plan was updated annually to make sure it reflected the current operating environment.  The business plan prioritised investment in three core areas, which were ensuring tenants’ homes were safe, decent and thermally efficient.  That was supported by an additional investment of £35 million.  Secondly, extending the benefits of council housing to more residents by expanding their housing delivery programme, which was supported by an additional investment of £37 million.  The third priority was around modernising the housing service to enhance customer experience and improve productivity and achieve full regulatory compliance, which had £2 million earmarked against it.

 

The business plan allowed the Council to deliver its day-to-day frontline services.  This included provision to respond to growing demands in areas such as damp and mould and planned repairs.  The plan would be affected by government policy in a number of ways.  In terms of the rent policy, it was noted that a protection had been offered for five years that would give the Council some certainty that it could continue to charge consumer price index (CPI) plus 1% as the rent increase.  In terms of right to buy, the reduction in the recent discounts was expected to result in less applications for right to buy requests.  A large number of applications were received immediately preceding the deadline.  The reduced income from potential sales meant the Council would have to put more of its own resources into the housing delivery programme, however this would be offset a little by the rent income from the properties that remained.

 

The social housing regulations, which came into force in April 2024, would bring with it a requirement to implement the outcomes of Awaab’s Law, Decent Homes 2, the compliance standards and requirements along with the requirement to reach EPC ‘C’ standards by 2030. 

 

There was also the target of an additional one and a half million homes announced by the government, which had been backed nationally by £500m investment to continue the affordable homes program.  All of those things would affect the business plan.

 

Paragraph 2.5 of the report mentioned revenue issues.  Over 90,000 repairs and maintenance visits were carried out per annum, with the budget details for this being provided in paragraph 2.5.3 of the report.  Supervision and management was also considered, where there was an allocation increase of £2.9 million for furnished homes, compliance and regulation and for the recent 1.2% increased National Insurance Contribution. A prudent decision had also been taken to set aside £250,000 for unforeseen occurrences.

 

Estate Services would also receive an increase of £135,000 in the business plan, allowing for response to increased demand on planned cyclical reactive estates management.  This referred to things like fly-tipping and clearing public bins of excess waste, amongst other things which affected estates looking as good as they could.

 

With respect to rent setting the proposal was to set rent in line with the government maximum of CPI plus 1%, which equalled 2.7% in total. The table on page 67 of the agenda pack reflected that this equated to a £2.48 increase for Rotherham households, which would generate £2.5 million increased income during the next financial year and a total of £337 million over the life of the business plan.

 

Other types of rent were referred to on pages 67 to 69 of the agenda pack.

 

The third section of the report referred to service charges, which were itemised in Appendix 5, would attract the same inflationary increase of 2.7%.

 

The Cabinet Member for Housing advised that in July 2023, Cabinet took the decision to match the average district heating bill to the Ofgem price cap, which was continued in 2024/25.  The proposal was to continue in 2025/26.  The impact of this for household bills was illustrated in Table 4 on page 71 of the agenda pack. The continuation of delegated authority to respond to significant movement in Ofgem price caps was also requested.

 

With respect to garage rents, a 10% increase was proposed to finance investment in estates. Despite the increase Rotherham garage rents would remain cheaper than the South Yorkshire average by a significant amount.

 

Other fees and charges mentioned in Appendix 5 of the report would receive a 2% inflationary increase.

 

The Cabinet Member for Housing stated that this was more than a mathematical exercise and took account of the impact on individuals and households.  The increases described would only affect 25% of tenants, with the remainder having the difference match funded by benefit increases. Cabinet were committed to continuing to mitigate all cost of living costs, as described in Appendix 8, page 93 of the agenda pack which set out the support available to tenants who experienced financial pressure.

 

There was the intention to share the contents of Appendix 8 with all Councillors to assist them in offering advice and guidance to residents.

 

The Cabinet Member for Housing drew members’ attention to the recommendations set out on page 60 of the agenda pack and called for their consideration.

 

The Chair thanked Councillor Allen and James Clark for the comprehensive report and invited questions or comments.

 

Councillor Blackham queried why the rent was being set at CPI plus 1%, when the legal information suggested that the Council had the power to set rates at a level it felt reasonable.

 

The Assistant Director for Housing advised that rent setting was a complex area and would summarise to the best of their ability.  They explained that the answer was different dependent upon the type of rent.  For social housing, which represented the majority of the Council’s tenants the rate of increase was set out in the ‘rent standard’ which was published annually by the government. Consultation on a new five-year rent standard was underway, but for 2025/26 it was confirmed that the maximum increase permissible was CPI plus 1%. The government also specified which month should be taken for the purposes of calculating CPI, so that was a published formula available over the internet.  Councils were at liberty to increase rents at a lower level, but were not able to exceed that.

 

Shared ownerships were different, with rents detailed in individual lease agreements with shared owners and Rotherham’s policy was to enshrine in the lease whatever government policy was at the time.  At the time, shared ownership properties were built and let, this was at retail price index (RPI) plus 0.5%.  As a result, this was very difficult to change.

 

Affordable rent different again, due to a higher starting point, however the increase was covered by the same rent standard so was also CPI plus 1%.

 

The Assistant Director for Housing clarified that section 7.3 of the legal advice needed to be read in conjunction with section 7.5, which may have caused confusion.

 

Councillor Carter noted the 10% increase on garage rents, and advised that they understood this was not the first time in recent years they had seen a significant increase.  They queried whether this had resulted in any reduction in occupancy.

 

The Assistant Director for Housing advised that they believed there had not been any significant increase in garage rents in recent years, and had increased in line with other service charges for the last two years. They explained that as Councillor Allen stated, even with a 10% increase rents were still lower than in neighbouring authorities, with the gap growing.  There had actually been an increase in occupancy in the garage estate which had been influenced by the appointment of an officer responsible for identifying and signing up tenants. A large number of vacant garages remained; however this had been a bigger issue and numbers were reducing.  There was also a strong track record of redeveloping or disposing of disused or underutilised garage sites which they were keen to continue.

 

Councillor Carter queried whether the large number of vacant garages were in specific locations or broadly distributed, and if so, could sites be used for housing given the limited potential for redevelopment within certain ward boundaries.

 

The Assistant Director for Housing advised they understood that was a question of two parts, relating to what had driven underoccupancy where it occurred and how the Council could better use garage sites.  They explained that there were some geographical areas within the borough where there was low demand for garages, possibly due to oversupply, given that there was in excess of 3000 garages in the borough.  Demographics were also a factor, as were properties with drives and the poor investment in the garage stock over a number of years.

 

The proposed increase would generate £59,000 in the next financial year, which was not a huge amount over 3000 garages, and was less than a quote recently received to demolish a row of garages.  This underlined the investment challenges given the pressures on the dwellings estates element and was why the proposed increase would support facilitating a future point at which more funding could be set aside to invest in the garage estate, which would in turn improve lettings.

 

With regards to the second part of the question there were lots of example such as East Herringthorpe where four constrained garage sites were redeveloped into ten new Council homes.  There was the intention to do more of that, learning from other Councils who have successfully overcome planning barriers due to such sites often being overlooked, working in conjunction with the planning team.

 

Councillor Yasseen queried what specific targets were for new housing in the context of the £113 million for delivery up to 2027 and the further £37 million post 2027, what that would look like as housing stock and how plans aligned with local need and demands.

 

The Assistant Director for Housing stated that a report would go to Cabinet in March, which OSMB may wish to consider, that would set out the agreement for the three-year housing capital programme. The purpose of that report was to provide an allowance in the budget to spend certain amounts on specific stock.  The detail for next year was included in the report, but the detail for subsequent years would be agreed at a future stage by Cabinet.  There would be a desire to keep plans open at an early stage, but as with the current housing delivery programme, challenging targets would be set.

 

With respect to the £37 million post 2027 referred to, this was to recognise that whilst funding was allocated in the business plan through to 2027, there was the need to invest in schemes several years before building in order to create a pipeline and beyond 2026/27 there was no funding in the business plan.

 

With that funding, there would almost certainly be a continuation of the acquisitions programme, which represented good value for money and enabled properties to be acquired in areas where building was difficult.

 

Councillor Yasseen acknowledged the strategic nature of the report, but sought assurances from the Assistant Director for Housing and the Cabinet Member for Housing that, given what was known around demands such as emergency accommodation etc, and the propensity for spikes in demand would the proposals address those acute circumstances.

 

The Cabinet Member for Housing stated they were happy to give those assurances. Whenever there was a conversation regarding a development or acquisition it was important that they were addressing those emergency housing or homelessness needs, taking account of the needs of potential tenants.  The Housing Delivery Programme report would reflect the level of consideration taken around properties, sites and availability in the context of the housing needs across the borough.

 

Councillor Yasseen sought reassurance that the cumulative impact of rent increases as outlined in the report had been considered and it the impact in terms of affordability was understood.

 

The Assistant Director for Housing stated that decisions were not taken lightly and other than rents where the proposed increase was CPI plus 1% and district heating, which affected around 1200 residents all other fees and charges would increase at 2% which was broadly in line with inflation.  Three quarters of tenants received all or most of their housing costs through housing benefit or universal credit which will absorb the impact of increases through increased benefits.  The exception to that was district heating which was a difficult challenge.  The proposal invested £200,000 in funding from the housing revenue account to keep prices at the Ofgem price cap so those 1200 are protected.

 

Councillor Yasseen gave examples of sheltered housing, where residents also had garages and had district heating to illustrate the cumulative effect of increases they had referred to. 

 

The Chair commented that they understood Councillor Yaseen’s concerns but suggested that there was the need for appreciation of the Council’s need to cover costs.

 

The Assistant Director for Housing stated that for clarity, the Council no longer had any sheltered accommodation; this had been decommissioned and sites such as those referred to were instead restricted to older people so in terms of rents there was no difference.

 

The bulk of any cumulative impact and possibly all of the cumulative impact for many residents would not represent a direct financial burden, being largely or entirely covered through the benefit system.

 

With regards to District Heating the longer-term investment needs were being considered, but it was acknowledged that this remained a challenge as an essentially loss making non-core housing asset.

 

Councillor Carter asked what external sources of funding were contributing to the housing delivery programme, given the government’s targets and sought clarity on whether this would reduce pressure on the housing revenue account and in turn, on rents and charges.

 

The Assistant Director for Housing stated that this was a discussion the Council was currently having with the government, and the answer at present was both yes and no. The Chancellor announced £500 million for next year, which sounded like a lot of money but was not really when that related to affordable housing delivery nationally.  The expectation was that as part of spending review discussions there would be further announcements with regards to longer term affordable housing funding.  Whilst there were no numbers yet, the government were clear on the ambitious nature of their plans, therefore the implication was significant sums for there to be national impact.

 

The Council had benefitted and continued to benefit from the affordable homes programme grant and the Council was actively discussing seeking grants for other schemes with Homes England.  Likewise, some income streams were drawn from the South Yorkshire Mayoral Combine Authority and as such the Brownfield Housing Fund had supported some Council schemes. There was also a national scheme called the Local Authority Housing Fund which had assisted some Council acquisitions, but the majority had come and would probably continue to come from the Housing Revenue Account.

 

The Assistant Director for Housing explained that the issue was less to do with the overall amount of money available, but rather the amount of funding that would be provided per property built through the programme.

 

Councillor Carter stated that he believed what the Assistant Director for Housing had said was that there was a proportion of each house the Council had to build that it would have to fund from the same pot of money that the rents and charges set out in the report relate to.  So consequently, the limiting factor in building more Council homes was the contents of the Housing Revenue Account.

 

The Assistant Director for Housing agreed that this was one of the limiting factors, but that there was a complicated funding mix for development.  Rotherham was one of 20 councils participating in a national exercise led by the London Borough of Southwark who represented the 20 largest local authority landlords in the country.  As such, the Council were part of a bigger piece of work making the argument to government that what council’s actually needed was debt relief because this would be the other way to help fund housing delivery. 

 

In 2012, all local authorities that own council housing were given a share of the national housing debt.  Rotherham Council had £300 million from that, and each year had to pay interest on that which equated to approximately 14 million this year, which was solely interest, not reducing the amount.

 

Therefore, one of the arguments that Rotherham and other local authorities had made to government was that if they were unwilling or unable to provide additional grant funding, the other thing they could do was look at how the national debt was structured because restructuring would free up resources allowing additional borrowing to support additional development.

 

Every time the Council built a new home, this generated an additional revenue stream, so it would be perfectly legitimate to borrow against that revenue stream. That was how lots of this type of investment was done, however there would always be a degree to which the Council was expected to self-fund its own housing growth programme.

 

Councillor Blackham wanted to understand whether zero based budgeting had been used in any manner when producing the budget for 2025/26.  They noted that of £89 million, £34.8 million was for management.  Notwithstanding that this accounted for cross charges from within the council, it appeared that more was being spent on management than and responsive repairs. They wanted to understand whether officers were happy with that position and whether that was efficient.

 

The Assistant Director for Housing advised there were to parts to that.  Firstly, things had to be categorised either as supervision and management or repairs and maintenance.  Supervision and management which correlated to the 38% referred to was not just overheads.  It included all housing officers, the staff hat ran the repairs service, tenancy support, district heating, grass cutting, caretaking etc so that was important to clarify. A breakdown of the components of the supervision and management element could be provided if it was felt that would be helpful.

 

They explained that the Council had undertaken benchmarking against other authorities and compared to its peer group, the Council was at the cheaper end and on most measures were below average in terms of running costs.

 

Given the amount of regulatory change, this was not the best year to go with zero based budgeting, as the future core running costs of housing were not known.  It was best to wait for government to complete the process in terms of regulating the sector, in order to understand the competences and conduct and what that would mean for core running as a Council.  That would be the point to have a conversation about how Rotherham compared to other authorities and potential savings.

 

Councillor Blackham advised that a breakdown would be useful and provide reassurance that value for money was achieved from the increased charges. The Chair confirmed that this would be noted as a recommendation.

 

Councillor Yasseen stated that they welcomed the Council’s involvement in lobbying government. In regard to the debt referred to, they wanted to understand whether this was this general debt the Council had borrowed or HRA related debt within a permanently ringfenced budget.

 

The Assistant Director for Housing explained that HRA debt was no different to other debt.  In relation to events of 2012, that was not debt that the Council had taken on over many years, this was a share of the national housing debt that in 2012, the government determined the Council could afford to service.  The amount was not related to monies spent on building or acquiring homes in the past, reflecting the unfairness of the allocation as it was not necessarily the Council’s debt just a share of the national burden. That was compounded by a series of assumptions made in 2012 that were not true.  It was assumed that right to buy sales would be at a particular level and they were not, it was assumed that rents would increase annually whereas the coalition government implemented a 5-year rent reduction requirement which massively reduced revenue income and it was assumed that there would not be any additional sector regulation, which there was.

 

The argument being made therefore was that the facts had changed and therefore settlements should be reconsidered, plus if there was the desire for more homes to be built Council’s would like to self-fund but were unable due to costs of servicing that debt burden.  There was a report called ‘Securing The Future of Council Housing’, which could be circulated to Councillors if it were helpful, which set out the ask from the 20 largest local authority landlords.

 

Councillor Yasseen thanked the Assistant Director for Housing for the helpful response.  They also wanted to understand the strength of the Council’s partnerships within the borough and sub-region.  This was based on recent discussions at a Health Select Commission meeting relating to the closure of staff accommodation blocks at Rotherham hospital. Councillor Yasseen stated that when reflecting on the impact of that closure, and the potential impact of an acquisition of that size they wondered whether the Council should have been aware of the Trust’s plans in advance and whether the Council should have considered those properties for its investment portfolio, or otherwise building a relationship before the news broke.

 

The Assistant Director for Housing stated that the Council was aware of this and that it had been widely reported on.  Based on the contents of articles in the media it was understood that the buildings, which were set within the hospital grounds, were considered not fit for purpose and this would be hard for the Council to challenge without its own surveys, and this would be inappropriate because they were not Council buildings.  Likewise, the Council were not approached about acquiring those buildings.

 

In terms of the individuals affected by those building closures, the Council’s housing options, and homelessness teams were directly supporting them and the Assistant Director for Housing stated they were proud of the way the Council had responded to the displacement seen, with some residents already successfully rehoused elsewhere within the borough.

 

In terms of whether there would be scope for acquisition, the Assistant Director for Housing stated that there was a risk of the Council looking to its own funding and acquisitions budget to solve issues such as this as money would quickly run out.  The purpose of the acquisitions programme was always to add flats and houses into Council stock and given that the site was within the grounds of the NHS Trust there would be practical management issues in addition to the repair and maintenance issues reported on in the media.  Therefore, this would probably be unlikely to be an appropriate acquisition for use as Council housing.  In the broader sense of working with the Trust, the Council was aware of the closure, was supporting residents and providing advice to the Trust regarding sourcing alternative accommodation for those affected.

 

Councillor Yasseen questioned the proactivity of the Council’s approach to acquisitions.  They cited examples of previous long terms acquisitions of land which were purchased, held and later sold on at significant profit.  They asked whether the approach was strategic in its vision and how long term the thinking was in terms of communities, growth and other factors and whether sites such as the hospital and vacant garages could be considered for development or acquisition in preference to green space.

 

The Chair stated that the NHS Trust would have a purpose for taking the decision to dispose of accommodation, that the Assistant Director for Housing had set out how the Council had supported those affected and that concerns relating to the Trust’s decisions should be channelled through the Health Select Commission as a scheduled item.

 

Councillor Yasseen stated that the matter had been discussed at length at the Health Select Commission, but they were asking a clear question regarding the acquisitions strategy and policy.

 

The Assistant Director for Housing advised that when Cabinet agreed to a budgeted acquisitions programme, an acquisitions policy also agreed which set out how acquisitions were to be approached.  One of the discussions when formulating policy was, is this about regeneration or adding properties to Council stock.  The determination was the latter. The issue with sites such as those referred to was that they take a long time, were expensive and did not align with the aim of adding usable properties to Council stock as quickly as possible. 

 

The Assistant Director for Housing offered to share the link to the acquisitions policy if this was of benefit.

 

Councillor Keenan asked if the increased capital expenditure, which appeared to have doubled, could be explained further and how confident the council was that the £2.5 million provided for addressing damp and mould issues was sufficient, given the potential health implications.

 

The Assistant Director for Housing explained that the first part of Councillor Keenan’s question related to accounting treatment.  Repairs of a certain size or variety counted as capital instead of revenue, so this was partly an indication that more of the repairs being called in by tenants were major repairs and therefore counted against capital. 

 

However, that in itself illustrated that some components in properties had reached their lifespan. Considering the last large national investment in housing stock, decent homes, a lot of those kitchens, bathrooms and other elements were now 25-35 years old, so it was not surprising that repairs called in were not routine. Given that was the case the Council was trying to address this within the business plan, by pivoting to proactive rather than reactive spending.

 

The implications of the EPC requirement Councillor Allen referred to would require significant investment for the installation of loft and cavity wall insulation, solar panels and air source heat pumps, but which would ultimately extend the lifetime of properties.

 

This winter, the number of damp and mould referrals was similar to last year, so it was anticipated that the position had stabilised.

 

Whilst this was not an exact science, it did appear that the budget allocated for next year was sufficient to address anticipated demand.

 

Councillor McKiernan referred to Appendix 5 on page 87 of the agenda pack and highlighted that it appeared that some ad-hoc charges were decreasing, when all other charges were being increased.  They wanted to understand the reason for this.

 

The Assistant Director for Housing explained that the Council were legally obliged to only charge leaseholders for the actual cost of service delivery.  In some cases, it had turned out that running costs were lower than expected and resultantly the fee had to be reduced.

 

Councillor Yasseen stated that within the report appendices, specifically the Equality Impact Assessment and Appendix 8, were out of date in respect of figures and referring to 2011 census data rather than reflecting up to data information regarding the make-up of communities.

 

They stated that they welcomed the plethora of support tenants were offered, but felt that support for Black and Minority Ethnic (BAME) communities was an area of weakness and it would be helpful to know what proportion of BAME residents accessed services and support, to ensure there was equity.

 

The Assistant Director for Housing stated that they believed that tenancy support and sustainment services at the Council were amongst the best in the country, which was supported by the low eviction levels, but noted that suggestions of ways to improve further were always welcome.  This year, the Council had evicted only three tenants out of 20,000 which was an incredible achievement during a cost-of-living crisis. Despite low eviction levels, housing income collection rates remained consistently really high.

 

They offered to provide Councillor Yasseen examples of work done in particular communities outside of the meeting concerned with addressing cultural barriers to accessing services.

 

The Assistant Director for Housing also stated that the Council were in the process of undertaking work to collect tenant data to enhance its capability to interrogate information to improve services and identify barriers.  This included collecting data relating to protected characteristics through tenant engagement to build a richer picture over time.

 

Resolved:-

 

1. That Cabinet be advised that the recommendations be supported.

 

2. That members of OSMB are provided with the ‘Securing the future of Council Housing’ Document for their information.

 

3. That a link to the Acquisitions Policy be shared with Members of OSMB.

 

4. That the information contained within Appendix 8 of the report titled ‘Support For Tenants with Financial Pressures’ be circulated to all members of the Council for their information.

 

5. That a breakdown of the items listed under the category of Supervision and Management in the HRA budget be provided to members of OSMB.