Agenda item

To present the draft Budget proposals and estimates for 2026/27 for the Housing Revenue Account.

The meeting resumed at 12.09.

The Budget Proposals for 2026/27 and indicative Budgets for 2027/28 and 2028/29 - Housing Revenue Account (HRA) were introduced by the Leader of the Council.

The HRA budget was set in the context of balancing the sustainable 30-year financial business plan, with the following priorities outlined within the Housing Strategy:

1.    The commitment to deliver new affordable and specialist housing in

partnership. 

2.    Continual improvement of the quality, standard and safety of homes.

3.    Support people to live healthy and independent lives in their homes.

4.    Facilitate housing to be sustainable.

5.    Support our communities to be sustainable.

Financial challenges of the HRA required Council in 2025/26 to allocate further financial resources during the financial year in response to increasing revenue costs.  These pressures continued into 2026/27 and this financial growth was reflected in the proposed revenue budgets shown at Appendix A.  Line 27 of Appendix A also showed the full extent of the decline of the balances and the Major Repairs Reserve balance reduced from £10.508m as at 31 March 2026 to £2.796m as at 31 March 2029.   

To avoid creating an unsustainable medium-term outlook for the HRA,

corrective actions were carried out across all budget areas of the HRA.

This analysis enabled a more accurate and targeted capital programme but

within a financial limit which did not put the HRA under financial pressure in the medium term.  However, in the longer-term HRA Business Plan projections indicated a potential need to draw on further reserves before potential falling in a deficit position by 2032/33. Therefore, spending plans would need to be reviewed to take corrective action to avoid a deficit. SKDC were also waiting on the outcome from Government review of rent convergence proposals, which if positive may have provided an increase in revenue income to help potentially bring the business plan back into balance. 

The provisional capital programme for the following 3 Financial Years was shown within Appendix B of the report.

Rent setting proposals increased the annual budgeted rental income from

£29.856m in 2025/26 to £31.091m in 2026/27. The average weekly rental

increase for individual properties was £2.65. The average rent in 2026/27 was £100.77 with a minimum of £66.12 and a maximum of £204.20.

Garage rents were proposed to increase by 2% and service charges were proposed to increase 3.8%.

In setting the budget for rental income for future years, in addition to the 4.8% rent increase, the following assumptions were made:  

-       Void rent of 1.5%

-       Following Government changes to the Right To Buy (RTB) discount rates the sales forecast was set at 15 for 2026/27 based on the reduced activity levels during 2025/26 since the changes were introduced.

The 2026/27 Capital Programme (excluding any carried forward) was included as Appendix B.

The Major Repairs Reserve (MRR) was the primary source of funding for the HRA capital programme. It was proposed that it would fund investment in the housing stock over the following 3 years.

Based on the current level of capital expenditure over the following 3 years the MRR balance was forecast to significantly decrease from £15.316m as of 31 March 2025 to a projected balance of £2.796m at 31 March 2029. Together with the increased pressure in dealing with the revenue repairs and maintenance issues puts a severe financial strain on the HRA with the overall level of reserves forecast to reduce from £35.723m at 31 March 2025 to £8.486m at 31 March 2029.

Whist the current HRA Business Plan showed a balanced position in the Medium Term, longer-term projections showed the need to draw on further reserves before potentially falling into a deficit by 2032/33.

This could have been mitigated if the Government provided capacity to increase rents through rent convergence. Further details were expected in January 2026 with the outcome of the recent consultation. If the outcome of rent convergence proposals was not sufficient to deal with the projected deficits within the HRA Business Plan then it would have been critical to revisit the future capital and revenue spending projections to ensure a balanced, fully funded business plan was attainable.

During discussions, Members commented on the following:

-       Whether the current plan for the Major Repairs Reserve was sustainable. The Leader confirmed the current actions were not sustainable, but the current higher output was due to clearing the backlog of works. The Cabinet Member for Housing noted that only 37 properties were pending the completion of stock condition reports and the previously high level of the reserves was due to insufficient investment in the stock condition. The Section 151 Officer noted the investment had been shaped by demands from service level.

-       Following LGR, it was confirmed HRAs would be amalgamated under the new unitary authority. The Head of Paid Service noted concern about the potential for consolidated HRA debt.

-       Regarding decarbonisation, it was confirmed SKDC would match funding received from the Warm Homes Grant and were seeking additional funding.

-       A Member praised the progress made by the current housing management team and noted the progress made on housing was why he broadly supported the administration.

-       Both the Leader and the Section 151 Officer confirmed that the budget had not made any assumptions in respect of LGR.

-       The approach of dealing with tenants in arrears was questioned. It was confirmed 6% of those in the Housing stock were in arrears at any one time and a range of support mechanisms would be emailed to Members by the Cabinet Member for Housing.

-       The impact on the Capital Buy programme was queried if the projected 15 right-to-buy sales did not materialise. It was confirmed that purchases through the Capital Buy programme were intended to corollate with any sales through the right-to-buy scheme. As such it was not necessary to make additional purchases to replace properties if they were not sold through the right-to-buy scheme. The Head of Paid Service also confirmed that a £180,000 grant had been received from Homes England for a feasibility study.

-       It was confirmed a summary of stock condition surveys would be presented to the Housing OSC.

12.55 – Councillor Matt Bailey left the Chamber.

-       It was confirmed there was approximately £80 million of debt remaining on the HRA.

Following discussions, Members noted the Budget Proposals for 2026/27 and indicative Budgets for 2027/28 and 2028/29 - Housing Revenue Account.