Minutes:
Consideration was given to a report presented by Dave Richmond, Director of Housing and Neighbourhood Services, and Mark Scarrott, Finance Manager, which detailed the proposed housing rent, new build rents, garage rent and communal facilities increases for 2015/16 to go forward for consultation, and subject to the outcome of that consultation to be presented at Cabinet for decision.
It was noted that wherever possible the Council had sought to restrain annual charge increases and Rotherham rents still ranked as some of the lowest in the country. Since 2002/03 DCLG had, however, required all local authorities to use a prescribed formula to calculate each tenants rent and to apply annual increases to actual rents to achieve the Formula Rent (Formula Rent was the rent set under rent restructuring). The formula rent from April 2015 had been revised and would now be linked to Consumer Price Index (CPI) which was consistent with other inflation measures used in policy by the Government including benefits and pensions. Applying this new formula for 2015/16 produced an average rent increase for Council tenants of 2.2%.
The Government expected that all similar properties in the same local area would have equitable rent levels, even if properties were owned by different social landlords. This process was known as ‘rent convergence’. The Government set a target for authorities to achieve rent convergence by 2015/16. However, changes to the rent formula had removed the flexibility to increase rents by an additional £2 above the increase in formula rent where rent was below convergence, therefore, 2014/15 was the final year to achieve full convergence. Rents in Rotherham would not have reached full convergence.
The average rent for 2014/15 was £72.79 over 52 weeks. The proposed 2015/16 average weekly rent using the new Government formula, collected over 52 weeks would rise to £74.39, an average increase of £1.60 per week.
Total housing rent income generated through the proposed revised weekly rents was estimated to be £79.558m in 2015/16 assuming 120 Right to Buy sales, and voids and rent adjustments at 1.8%.
The Council completed the building of 132 new energy efficient properties in 2011/12. For these dwellings, the funding model assumed that rents would be aligned to the Council’s existing rent structure based on these dwellings having a higher property value (than existing stock). These rents were assumed to be fully converged and were, therefore, set higher than those of the existing Council stock. Consequently the proposed average rent to be charged across these properties would be £96.40 over 52 weeks based on the new rent formula an increase of £1.93 per week.
Councillor Whelbourn, in considering the detail provided, expressed his concern at how rents for two similar properties could be different following tenant turnover and was advised that this was a recommended approach by Government following a property becoming vacant.
Councillor Ellis asked if any penalties could be imposed by the Government for not reaching convergence following the revising to the formulae and it was pointed out that the purpose of self financing determination was to give local authorities the resources, incentives and flexibility they needed to manage their own housing stock for the long term and give tenants greater transparency and accountability as to how the rent collected was spent on the services provided.
Councillor Ellis also asked if the thirty year business plan detailed any further strategic acquisitions to add to the Council house stock or if there was any way the new properties could be exempt from the right to buy scheme.
The Director of Housing and Neighbourhoods confirmed the receipt of two right to buy applications, but the conditions of sale were such that the capital expenditure on properties were to be recoupled within a set timeline. Rotherham had not considered any options to transfer its housing stock to a housing trust like the model used in Selby, but it may well be something to consider for the future.
Councillor McNeely pointed out that the shortfall in housing rent could significantly alter/effect the thirty year business plan and was informed that the thirty year business plan had been refreshed to take into account the changes to the rent formula and investment plans to give indicative income and expenditure for the short, medium and long term. Key to the original Business Plan was the requirement to ensure that rents converge by the Government’s target by 2015/16 and increase in line with national guidelines. Changes to the formula rent from April 2015 would mean that the Council would now not meet rent convergence which would result in lower levels of income and, therefore, impact on the investment plans within the HRA Business Plan.
Due to historical decisions to limit rent increases, Rotherham’s rents were not scheduled to reach full convergence until 2016/17 on the existing formula. Under the new formula, Rotherham would receive approximately £4mless income than planned under the convergence process. This shortfall would obviously be compounded over future years within the 30 year Business Plan, and would have a significant effect on the previously predicted surpluses within the plan. Government guidance stated that where properties have not reached formula rent by April 2015 it was expected that the rent is moved up to formula rent when the property was re-let following vacancy. On average 1800 properties were re-let each year, adopting this policy would generate additional income of approximately £172k in 2015/16 and the Council were keen to look at this.
Councillor Reeder also asked about the right to buy rules for new properties and was informed that any tenant had the right to submit an application. There were no plans to buy back former Council houses from former tenants.
Resolved:- That the recommendations to the Cabinet Member on Monday, 12th January, 2015 be noted:-
· An average dwelling rent increase of 2.2% in accordance with Central Governments (DCLG) Rent Formula which results in an average increase of £1.60 per week collected over 52 weeks.
· An average rent of £96.40 for new build (energy efficient) council properties.
· That rents are set at formula rent when the property is re-let after vacancy.
· An increase in line with the Consumer Price Index of 1.2% for garage rents, communal facilities and the cooking gas charge.
· Note the draft Housing Revenue Account Budget for 2015/16.
(Councillors Currie Cutts, Ellis, McNeely, Reeder, Sharman, Wallis, Whelbourn and Wyatt declared personal interests on the grounds that they were or had family or friends who were Council tenants)