Agenda item

This report sets out the HRA budget proposals for the financial year 2022/23 including changes to rent levels and other charges and explains the wider financial risks facing the HRA. Recognising the cost of living pressures faced by tenants due to inflation and Government tax increases, it notes that the administration proposes a real-terms reduction in rent.

Danny Rochford (Head of Finance, Economy & Housing Revenue Account) provided a presentation on the HRA highlighting the following key points:

·       The HRA was presented to the Housing Representatives Forum and support was received for a rent increase.

·       The rent increase of 1.5% (real terms reduction), was well below the Government’s proposal of 4.1%. The average rent will be lower than neighbouring boroughs’ average rent.

·       The 1.5% rent increase will place further pressures on the HRA. 

·       Significant emerging pressures included – Depreciation - £1m, Void Homes – £0.7m, Inflation - £0.6m, Improvements to repairs and maintenance - £0.4m, Health & Social Care Levy - £0.25m

·       Therefore, savings of £3.8m were needed for 2023, rising to £7.1m in 2024.

·       Most of the savings required remained unidentified at this stage. Officers would be working over the next few months to meet these targets.

·       The challenging savings target must be achieved to ensure the financial sustainability of the HRA.

·       Both with and without the savings target, we are planning to spend more money than we have coming in. This means we will need to draw at least £4m from the HRA’s reserves next year. Much of the reason we need to make more savings over the coming years is because reserves are reducing and we need to move quickly to a position where our costs are matched by income.

·       The HRA’s Long Term Financial Plan took the following factors into account: The current financial position, significant compliance and climate change capital spending plans, macro-economic changes and new affordable housing development schemes.

·       Savings of £8m over the next 3 years were to be delivered through: a review of management costs, the Housing Transformation Programme, income opportunities and other plans yet to be identified.

The Chair invited Councillor Lisa Homan to comment on the HRA presentation. Councillor Lisa Homan explained the 1.5% rent increase recognised the recent increases in the cost of living and feedback from the Housing Representatives Forum was positive and included a number of suggestions where future savings might be identified. Councillor Lisa Homan commented that there was room for further efficiencies, but these would be challenging. Concluding her remarks, she commended the proposed rent increase and service charges as set out in the report, notwithstanding the uncertainty and level of risks which had also been highlighted.

Councillor Adronie Alford asked what the difference was between Hammersmith and Fulham rents and an average figure for Housing Associations operating in the borough.

Action – That Danny Rochford provide Councillor Adronie Alford with a list of rents comparing Hammersmith and Fulham properties with an average rent of Housing Associations operating in the borough.

Councillor Adronie Alford highlighted the lack of reserves in the Housing Revenue Account and commented she was deeply concerned about the unidentified savings and level of savings which were required.

Commenting on the reduction of income due to the higher void rate, Councillor Adronie Alford asked whether this was due to the constraints of the Covid period (with works being delayed) , or whether it was due to historical issues with housing stock such as mould and damp. In response, Richard Buckley, Assistant Director Resident and Building Safety explained that Housing had been working with Finance to reduce the forecast and one of the reasons for this was the handover from the interim contract that was awarded to United Living (which under-performed).

The Council were currently working with Morgan Sindall, Kiers and Mears and officers were confident that the voids performance would be back on track within six months. 

In relation to significance compliance and climate change capital spending plans, Councillor Adronie Alford asked if this included the sums which had been identified for damp and mould or whether these were additional costs. In response, Richard Buckley confirmed that damp and mould was covered by the Asset Management Capital Strategy for the 12-year Investment Strategy. Closing her remarks, Councillor Adronie Alford reiterated her concerns about the need to find unidentified savings and requested through the Chair, that the Committee be provided with a further update on how the savings were being addressed.

Action – The Chair asked Danny Rochford to provide a further update on the progress to address unidentified savings to a future meeting.

The Chair welcomed the real terms cut in rent and that this proposal had been discussed and supported by residents at the relevant forums. Councillor Rory Vaughan noted the significant pressures on the Housing Revenue Account and that savings remained unidentified at the present time. He asked for further details on how these savings would be found and what the likely timescales were to identify the savings. In response, Danny Rochford explained officers were in the process of identifying savings and officers could report back in several months’ time. Emily Hill, Director of Finance, confirmed that officers had started a wide-ranging review of repairs, as well as a review of costs, which would include a benchmarking exercise. Other potential areas for savings included the Housing Transformation Programme and digitisation of services to tenants.

Concluding, the Chair commented it was evident there were several ongoing workstreams to help try and find (currently) unidentified savings. The Committee welcomed the 1.5% rent increase given the pressures on tenants and residents and thanked officers for their hard work on the budget.

RESOLVED

That PAC notes and comments on the Housing Revenue Account 2022/23 budget and the 40-year HRA financial plan.