Agenda item

Housing Revenue Account 30 Year Business Plan

Report summarising the Housing Revenue Account 30-year financial business plan, a requirement of the HRA self-financing system introduced in April 2012

Minutes:

The Cabinet Member for Finance and Resources introduced his report on the Housing Revenue Account (HRA) financial business plan. The business plan was a requirement of the self-financing system. The 30-year forecast was detailed in Appendix A.

 

An explanation of the financial structure of the HRA was provided by the Head of Finance. The HRA subsidiary system was replaced in 2012 with a self-financing system. Under the system the Council was required to produce a 30-year plan, which showed income and expenditure expected to be incurred by the HRA to ensure it was financially sustainable. The Council was required to make a £122 million payment to Government, which was associated with the debt related to the Council’s housing stock. Currently there was £93 million outstanding. Under the self-financing arrangements, the Council could keep housing income for reinvestment into council houses.

 

Members heard that the business plan ensured a robust long-term plan. Certain assumptions needed to be captured within the plan, including annual modelling, and updated estimates of income and expenditure to ensure affordability of future plans. Assumptions made when producing the plans included using historic information to anticipate right-to-buy sales which would impact on rental income. It was noted that the number of new builds had not kept pace with the number of properties lost through the right to buy. Other assumptions related to major expenditure such as bathroom and kitchen replacement, the rate of voids and inflationary increases on rental income.

 

The Head of Finance explained the data that was presented in Appendix A to the report, highlighting the main changes within the 30-year Business Plan. It was noted that the reduction in reserves and the reduced level of interest needed to be reviewed in the context of Covid-19. Rental payment presented the highest consequential risk from Covid-19 though this was reported as having no inverse impact at that time. This would continue to be monitored with the Business Plan being adjusted accordingly.

 

A Member noted that figures showed an estimated 50 properties being lost each year under the right-to-buy scheme and questioned how many have been lost over the past year and how many new build properties the Council anticipated being built in the coming years. The Member additionally asked whether there were plans to improve how voids were prepared prior to reletting.

 

Action:

 

The Interim Assistant Director of Housing to provide an indication on the total net loss of property year-on year from April 2012 and the number of replacements

 

The Interim Assistant Director of Housing to provide details of void repair and improvement prior to re-letting.

 

It was noted that figures within the tables on pages 35 and 36 (Housing Revenue Account 30-year Business Plan and Housing Revenue Account Reserve Balances) would include brackets to demonstrate clearer methodology in future reports.

 

The Chairman questioned whether the terms of the Equal Instalments of Principal (EIP) loan had a fixed interest rate, which the Head of Finance confirmed.

 

It was suggested that the Council, if it chose, could repay the loan in full, saving the interest payable. It was noted that there would be a penalty for exiting early.

 

The Chairman indicated that he would have anticipated the report would include detail around the choices that had been made. Committee Members noted that this detail was captured in the Housing Strategy, which was last reviewed by the Cabinet in July 2019. The Cabinet Member for Finance and Resources confirmed that the decision was made to refinance the loan due to the low interest rates along with flexibility that would be provided by having cashflow available for investment in the Council’s housing stock.

 

The Chairman extended his appreciation for the report and noted his and the Members comments.

 

Supporting documents: