Agenda item

To present to Council, the Executive’s Housing Revenue Account budget proposals for 2022/23.

Further to Minute 119 of the meeting of the Cabinet held on 28 January 2022, the Council considered the Executive’s Housing Revenue Account (HRA) budget proposals for 2022/23.

Council was informed that there had been no further changes required to the forecast or budgets, so Appendices A to E to item A.2 of the Report of the Cabinet remained the same as those considered by Cabinet on 28 January 2022.

As reported to Cabinet on 28 January 2022, there was a budget surplus of £0.333m in 2022/23 that had been committed to investing in capital works, which included the delivery of new affordable housing but also the continued investment in the homes of our existing tenants. The surplus £0.333m therefore remained as a contribution to the HRA capital programme.

Members were informed that for 2022/23, the Executive’s budget proposals set out an increase in dwelling rents of 4.1% along with a total net HRA expenditure budget of £14.926m and a capital programme totalling £3.790m.

As previously reported to Cabinet, due to the relatively volatile CPI rates experienced since the start of the COVID 19 pandemic, if the proposed level of rent increase in 2022/23 was taken together with the relatively low figure of 1.5% last year, then the average annual increase would be 2.8% over the two years.

Council was made aware that the 4.1% increase in dwelling rents resulted in an average weekly rent of £87.55 in 2022/23 (£84.10 in 2021/22).

Members were advised that the proposed budget reflected the continued repayment of debt, with the total level of existing debt falling to £35.350m at the end of 2022/23.

Council was informed that the estimated HRA general balance at the end of 2022/23 totalled £4.325m.

The Leader of the Council (Councillor Stock OBE) made the following budget statement:-

“Our approach to financial stewardship, sustainability and governance, that I talked about when introducing the General Fund budget earlier, applies equally to the Housing Revenue Account. These may however require tweaks here and there to address not only some different accounting rules, but also because the HRA has a landlord focus that comes with looking after more than 3,000 homes across the District.

Last year we talked about revisiting the 30-year business plan in the light of various strands of work either completed, on-going or planned, but we can do this in the knowledge of being able to operate from a really strong base, both financially and reputationally.

The budget for 2022/23 that we are considering tonight has therefore been developed against a revised 30-year business plan. As discussed in the reports we have considered over the last few months as part of developing the budget, the 30-year plan has seen a reset in terms of the increased cost of looking after our existing tenants’ homes and delivering capacity to ensure we remain an excellent landlord, an accolade we are very proud of and always seek to maintain.

As with the general fund, the HRA also faces many challenges looking ahead beyond 2022/23, one of which is the financial consequences that will likely emerge from the Hackitt Review of Building Regulations and Fire Safety following the Grenfell tragedy and any revised decent homes standards that may ensue.

We want to make sure we remain up to that challenge, as we need to make sure that our tenants are always living in safe, comfortable and quality housing.

We have also set out our ambition to increase the supply of affordable housing either through acquisition or building our own.

This ambition can be managed via the new Corporate Investment Plan, complemented by the 30-year HRA business plan. This is where we will need to continue to balance the various competing demands, whilst making sure that we never stray too far from the solid financial foundations we have laid down over the years.

We must always be able to turn to good financial management and stewardship as part of any future planning we undertake. The 2022/23 budget reflects a really good example of some of that thinking. It is well worth remembering that when we transitioned to the HRA self-financing model back in 2012, we had to buy our own council houses back from the Government, and we had to pay out over £30 million for the privilege! Quite a unique and frankly astonishing transaction I think we would all agree.

However, we remained positive and structured the necessary loan agreements that we had to enter into in a way which gave us future flexibility. By taking this approach and managing our finances well, 2022/23 sees one of these loans being repaid. This has reduced our annual debt and interest repayments, which can now be reinvested back into existing tenants’ homes or into new housing for our local residents.

Based on the managed approach we took, we will see further opportunities to reduce debt and interest payments in future years, which will be invaluable in supporting the HRA looking ahead over ten to fifteen years and longer.

Although it was mentioned at Cabinet back in January, I would like to take this opportunity to say thank you again to the Resources and Services Overview & Scrutiny Committee along with the Chairman and other members of our Tenants’ Panel for taking a constructive and active part in the consultation process that helps us keep developing our HRA financial plans. 

The Resources and Services Overview & Scrutiny Committee made the very important observation about setting aside funds to meet the costs that will likely arise from the housing stock condition survey that we will be undertaking in 2022/23. The budget we are considering tonight echoes this point, as we are looking to make a further contribution of £333k to the HRA capital programme to ensure we can make the continued investment in the homes of our existing tenants but also to support the delivery of new affordable housing for local people.

What we have managed to achieve and what we are planning to deliver is quite remarkable when you think that the Government required us to reduce rents by 1% for the four years from 2016/17 to 2019/20. This effectively removed £30 million from our HRA budget over the long term, given its telescopic effect. But as I have said before, we have to remain focussed on the things we can control rather than get bogged down stressing about things we can’t, which is what we have done, and we are now seeing the benefits of our positive ‘can do’ approach.

Similarly to the argument about council tax increases, increasing rents is always a compromise and balance we need to strike with providing good quality homes in a sustainable and long-term way.

We are recommending a 4.1% increase in rents in 2022/23, which I think helps us maintain this balance. As set out in the report, the pandemic introduced a significant level of volatility in inflation rates, with a CPI level of just 0.5% last year. We have seen CPI rise significantly over the last few months, with the rate even increasing during the time we were developing this year’s budget. The current rate of CPI is now even higher than the rent increase we are proposing, a gap that could easily get bigger during the next year.

Given this volatility in the level of CPI, it is reasonable to look at the overall level of rent increase over the last two years and as set out in the report, taking these two years together, the average increase is 2.8%.

If we are going to increase rents, we also have to squeeze as much value out of the money we collect as possible, and that can be seen in the 30-year business plan. It also has to be seen by our tenants, which I think we can ably demonstrate over recent years and going into 2022/23.

If you just look at the capital and revenue investment in tenants’ homes, well over £6million a year goes back into maintaining and improving the 3,000 homes that we own.

In terms of our reputation and as I highlighted earlier, we will continue to make sure that our tenants live in safe, comfortable and quality housing, which will always be at the centre of how we manage the HRA.

This is in addition to delivering on our key priority of increasing the supply of affordable local homes for local people – via a financially strong position we want to maintain the momentum from the amazing properties we have built in Jaywick. A good example of where we are doing this was reflected in the decision we took back in December, which will see additional high-quality homes being delivered on the Weeley Council Offices site.

Just before I wrap up, I think it is worth reflecting for a moment that countless local authorities got rid of their council housing many years ago, lots of other councils transferred the ownership of their housing to separate companies. Here in Tendring we have always recognised the importance of really good council housing and the difference decent homes make to peoples’ lives. We have always striven to improve and enhance the quality of the homes we manage and to increase the numbers we have available. It is no idle boast to say that we probably lead the country in this regard; we should all be extremely proud of that fact.

Chairman, the budget we are considering tonight is another step in our 30-year plan that is built on sustainability and good financial management to secure the future of the homes of our tenants, both now and looking ahead beyond 2022/23. I commend this budget to Council.”

Councillor M E Stephenson addressed the Council on the subject matter of this item.

It was moved by Councillor Stock OBE and unanimously:-

RESOLVED that Council approves:-

(a)    a 4.1% increase in dwelling rents in 2022/23; and

(b)    the Housing Revenue Account Budget for 2022/23 as set out in Appendix B to item A.2 of the Report of the Cabinet, along with the Scale of Charges, HRA Capital Programme and the movement in HRA Balances / Reserves, as set out in Appendices C, D and E respectively, to the aforementioned report.