Agenda item

Housing Revenue Account Business Plan 2018-19

Report of the Strategic Director of Adult Care and Housing


Cabinet Member:     Councillor Beck

Commissioner:         Kenny (in advisory role)




That Cabinet recommends to the Council:


1.    That the proposed 2018-19 Base Case for the HRA Business Plan and investment in services detailed within be approved.


2.    That the plan be reviewed annually to provide an updated financial position as new government regulations come into force.



Consideration was given to the report which detailed how the Housing Revenue Account (HRA) recorded all expenditure and income relating to the provision of council housing and related services, and how the Council was required to produce a HRA Business Plan setting out its investment priorities over a thirty year period.


A series of options were considered as part of scenario modelling, these were detailed at Appendix D of the report. Details of the preferred HRA Business Plan Base Case Option D were set out in the main body of the report. This would result in the HRA having an Operating Surplus of £83m by Year 30 and provide support to the housing growth agenda and the Council’s General Fund position.  Additional resources had also been redeployed to manage the modelling process.


Following the introduction in 2012 of HRA self-financing, whereby the Council was awarded control over its HRA in return for taking on a proportion of national housing debt, Rotherham’s HRA was in a strong position with a healthy level of reserves.  However a number of policies have been introduced by Central Government that resulted in a reduction to HRA resources, namely:-


·                1% per annum reduction in Council rents over four years.

·                Reinvigoration of the Right to Buy (reduction of qualifying period to three years): Reducing stock.

·                Welfare reform - bedroom tax, universal credit and benefits cap: Impacting on tenants’ ability to pay their rent, and increasing the resources required by the Council to collect rent from tenants in receipt of benefits.

·                Introduction in the future of mandatory fixed term tenancies.

·                Introduction in the future of the enforced sale of high value properties/ equivalent levy  meaning the Council would have to pay in the region of £2m annually to the Treasury, to cover the costs of the discounts housing associations must offer now they could offer the Right to Buy to their tenants.


Whilst significant savings were required to ensure the HRA Business Plan was balanced over the thrity year period the extent of these pressures had reduced somewhat following recent policy announcements; the most significant of which was the return of the previous rent formula from 2020-21 onwards i.e. CPI + 1% for five years. This policy change increased HRA balances by over £104m over the life of the Plan.


The subsequent review of the HRA Business Plan for 2018-19 was now focused on achieving:-


·                Contributing to the borough’s housing growth target of 900 homes per annum through building and/ or purchasing new properties.

·                Maintaining and continuing to improve our 20,500 Council homes.

·                Contributing to the development of low cost home ownership products that are needed locally and will play a critical role in Rotherham’s overall economic growth.

·                Continued investment to support the General Fund budget position.


The report further detailed a technical overview of the current position and the reason for changes to the Plan and considered alongside proposed 2018-19 rents, service charges and budgets.


Going forward whilst the financial position of the HRA deteriorated over the next two years due to the ongoing 1% per annum rent reduction this was against a backdrop of a healthy reserves position.  These levels of reserves represented a significant opportunity to support housing growth throughout the borough over the next five years. Consequently it was proposed that £57m of HRA resources would be invested in building new homes over the next five years. This included grant from the HCA of £6.8m. Assuming all properties developed for private sale were sold at forecast values, this would result in sales income of circa £16m.


This report had been considered by the Overview and Scrutiny Management Board as part of the pre-scrutiny process who were in support of the recommendations.  Further detail had also been requested on the options discounted for the Base Case and this had been provided and circulated to Overview and Scrutiny Management Board Members prior to the meeting taking place.


Cabinet Members noted the potential for adverse changes in rental income as a result of universal credit and the impact on vulnerable residents alongside the spare room subsidy which would have to be managed locally.  However, it was hoped the Government would reverse the currently deferred decision on the sale of higher value Council Properties and this would be removed from the Plan.


Resolved:-  (1)  That Council be recommended to approve the proposed 2018-19 Base Case for the HRA Business Plan and investment in services detailed within.


(2)  That the plan be reviewed annually to provide an updated financial position as new Government regulations come into force.

Supporting documents: