This presentation sets out the HRA Financial Plan 2020/21.
Minutes:
Danny Rochford (Head of Finance, The Economy Department), introduced the presentation that covered the proposed Housing Revenue Account (HRA) budget and the Financial Plan for Council Homes (including the proposal to increase rents).
Providing an overview, Danny stated that every year, the council reviewed the Housing Revenue Account (HRA) budget which enabled officers to draw up a fresh 40-year financial plan for the HRA to ensure that a long term, sustainable plan was in place. Details were provided on a series of challenges and pressures to the HRA which were summarised as follows:
§ Loss of rent for four years
§ Increased spending on Fire Safety
§ Increase in accommodation costs
§ Housing Development Programme
§ Repairs and maintenance contract costs
§ Asset Management Strategy (a considerable proportion of the housing stock was nearing the end of its life expectancy)
With these pressures in mind, Danny explained that this year’s refresh sought to deliver and fund improved housing services to residents and invest for the future. However, to achieve this, a rent increase of 2.7% was necessary based on CPI (Consumer Price Index) +1%, in line with the Council’s commitment made in 2015 to make rent increases affordable. It was noted that it was also necessary to make savings in ongoing costs over four years, which would lead to an annual cost saving of £4m per annum.
Danny explained that failure to take either of these actions would result in either; a reduction in essential services to residents, or significantly increasing the savings target to over £4m. He explained that in real terms, the rental increase amounted to an average rent increase of £3.12 / week.
Discussing the pressures further, Cllr Lisa Homan highlighted that the rent rise which had been considered in the past, was actually lower than what had been suggested back in 2015. The importance of the Fire Safety Plus scheme was underlined, as was the need for the Council to respond to the emerging (central government) guidance (at no additional expense to leaseholders). It was also noted that more money was being spent on repairs as this area had been previously underfunded.
Mark Meehan explained that before any recommendation to increase rents had been made, officers had surveyed all the other 32 London Boroughs. He confirmed that the Officer proposal to increase rents was identical to what all the other London Boroughs were doing. In relation to fire safety, he reiterated the need to ensure the Council was in a strong position to react and implement legislative change.
Cllr Ann Rosenberg asked who had the ultimate responsibility when a building was being constructed, to ensure they were compliant (with fire safety legislation) and residents were not left with worthless properties. She explained she was aware there were around 400 properties which been identified where the construction materials meant that householders were unable to move or secure further funding from lenders. Mark Meehan explained this topic could be brought back as a future item or he could brief Cllr Rosenberg outside the meeting. In general terms, Mark Meehan commented that thankfully only a few properties in Hammersmith and Fulham had been identified which fell into this category.
Cllr Lisa Homan commented that the Environmental Housing Team which addressed issues in the PRS were conducting a large survey and feeding information to Government on non-Council buildings, so there were a variety of work streams also being done on non-housing stock. As a closing remark, Mark Meehan said it was only right that the free-holder of the building paid for any remedial works to rectify the building and make it compliant
The Chair confirmed that the Committee wished to re-examine the work being conducted on the Fire Safety Plus scheme within the next twelve months.
Action: That Officers provide an update on the Fire Safety Plus scheme in the next year.
Commenting on the ongoing nature of fire investigations, Cllr Helen Rowbottom asked about the budget implications of these works and how officers were about able to predict what funds were needed. In response, Mark Meehan explained that officers were not able to predict and did not know what the specific funding requirements would be until events transpired. This was where the use of reserves came into play. As Cllr Rowbottom was a nearly elected Member, he offered to provide her with a separate briefing on the Fire Safety scheme so she conversant with the specific projects were operating in her ward.
Cllr Adronie Alford asked whether the Officers had discovered any significant issues with other building/s during the course of implementing the fire safety plus changes. In response, Mark Meehan explained that they had not.
Residents were invited to ask questions through the Chair. A resident asked if it was possible for Officers to provide a breakdown of how (after the rent increase had been agreed by Cabinet in April) the rent was allocated and what services were being paid for. Danny explained that the Council would be sending a letter to all tenants at the end of February 2020 in advance of the budget consideration in April. He confirmed that the letter would contain a table itemising all the elements that formed the overall rent charge (including basic rent as well as the separate service charges). The resident explained that some London Boroughs were producing a booklet which provided details of how the rent was calculated. Mark Meehan stated that the Housing Department would be unable to issue a booklet before 6 April 2020, as the Authority was duty bound to give a specific notice period before the rent increase came into effect, however, a booklet was something that the Authority might issue in the future.
Cllr Rowan Ree asked whether the Authority had seen any cost savings arising from the Fire Safety Plus scheme such as insurance or repairs. Mark Meehan noted the question and explained he would respond outside the meeting.
Action: Mark Meehan to contact Cllr Rowan Ree outside the meeting with further information regarding cost savings and the Fire Safety Plus scheme.
A resident asked whether the recently replaced fire-doors as part of the Decent Homes Programme, could be retro-fitted elsewhere to speed up the implementation of the Fire Safety Plus scheme. He also expressed concern at the £500k savings which needed to be found annually (to achieve the £4million saving within 4 years). In response, Cllr Lisa Homan explained that while there was additional money in the Maintenance Budget at present, the Council was actively looking to find efficiencies as well. Mark Meehan reiterated this point and confirmed that the Housing Department was currently reviewing agency posts, vacancies, collection rates and the voids process as part of an overall drive to achieve further savings.
A resident asked about the £600k the Council received for water rates and whether this would continue. In response, Danny confirmed that the billing process would be handed back and so the contractual relationship would return to being between residents and Thames Water. Essentially, the HRA would lose £600k income per annum.
A resident expressed concern about the Council’s complaints procedure and was informed that the Council had a robust complaints procedure in place, and should they have further concerns, these could be discussed separately outside the meeting. The resident also raised concerns about the breakdown of the rents charges they had received. The Chair confirmed it would be beneficial for the Committee to have a better understanding of these and asked officers to provide information outside the meeting of how these were calculated.
Action: That officers provided a breakdown of the rent charges to the Committee outside the meeting.
A resident asked if it was common practice to have a 40-year business plan. Cliff Parker (Assistant Director, Housing Finance) confirmed this was usual practice as properties had a 100-year lifespan. In relation to the development of new properties, officers needed to work out the costs and income streams associated with the properties and these only became apparent after at least 40 years had elapsed.
Concluding the item, the Chair confirmed that while potential rent increases were not welcome news for tenants, the pressure and difficulties facing the Council had been well made by Officers in the presentations which had been provided. The Chair confirmed it would be good for the Committee to receive the breakdown of rent charges so these were clear to the committee and also so it could have an understanding of what might be developed in future years.
RESOLVED
That the Committee reviewed and commented on the report.