Agenda item

Report of the Head of Finance and Director of Housing

The Director of Housing presented the report to Members.

He informed Members that the report was an updated version of a report that had been presented to Cabinet on 18 November 2014. He stated that the overall forecast for the current year shows a deficit close to £900,000, largely as a result of unplanned expenditure on the Decent Homes Programme. Members were informed that this deficit was funded from the Housing Revenue Account Reserves, and that the reserves currently stood at £4.37 Million.

In relation to rents, the Director of Housing advised Members that the current government policy (due to expire in March 2015) was to try and achieve rent convergence or target rents nationally for all social housing tenants. The idea being that Council and Housing Association tenants should pay similar rents for similar properties. He advised Members that historically the Council had charged low rents and that currently only 25% of the Council’s tenants paid target rent; in contrast most local authorities had 90% of tenants paying the target rent. New government guidelines, effective from April 2015, suggest that rent increases should be limited to the Consumer Price Index plus 1% each year. He advised that for councils like NWLDC, which still had nearly three quarters of its properties at rents considerably below target rent levels, this would have a substantial impact on the future business plan, and income projections would fall significantly. This could potentially have a detrimental impact with limited funding being available to maintain the decency programme and invest in future stock improvements.  

Following a review of the current rent plan, alternative rent increase options were developed for consideration for consultation by Cabinet, and it was agreed by Cabinet to approve option C, which would see rents increase by CPI plus 1% plus up to £4 per week until target rent was reached. This would entail NWLDC using its discretion to set its own rent levels and not following the guidelines. 

The Director of Housing advised Members if the Council adopted the new government guidelines, then the Council would have to borrow £7.3 million by 2022 to meet repayments on a £13 million loan. By adopting option C the Council would only have a liability of £1.2 million in 2022. It would also mean the Council having an additional £9 million of income  over the next 10 years to invest in Housing.

Councillor S Sheahan expressed his concerns that the Housing Revenue Account spending was not being kept under control, and cited the £900,000 deficit as an example.  He asked officers to explain how they would address the deficit and prevent tenants from having to subsidise overspending on the decent homes programme.

The Director of Housing responded that he was confident spending was under control and highlighted that deficit was a result of some incorrect assumptions about what central government would fund and what the Council would have to fund, and wasn’t a case of over spending on the Decent Homes Programme. He advised Members that the Council do monitor the contractors providing Decent Homes Improvements and that a new team manager had recently been appointed to focus on the Decent Homes Programme. He added, that he wanted to see value for money from the Councils contractors and that the actions taken by the Council would help realise that.

Councillor N Clarke sought clarification on why Option C had been chosen opposed to Option A. He stated that the proposed rent increase of 5.4% sounded extremely high considering the well publicised lack of increase in wages and salaries. He stated that being the Councillor for the Ward with the most Council Tenants in the District, it is something that he feels quite strongly about.

The Director of Housing acknowledged that Option C would result in two years of higher increases in rents, however in the longer term rents were lower under option C than Option A. In addition, he stated that under Option A the Council might lose revenue through the Housing Benefit Subsidy Limitation rules. If the Council chose to increase its rents too quickly at too high a level, a portion of the Housing Benefit it received might have to be returned to the Treasury.

In response Councillor N Clarke stated that he felt that the increases in rents tenants were facing were a result of overspending on the Decent Homes Programme and that this should be scrutinised in the ensuing months. He also queried the proposal to re-let all properties at target rent levels, even when tenants with a tenancy prior to April 2008 were transferring to another property, as he felt the higher rent would act as a disincentive for those affected tenants to apply for transfers. The Director of Housing advised that as 94% of properties would be at target rent by April 2016, any such disincentive would only apply for a period of 12 months, so the impact would be limited.   

RESOLVED THAT:

That the Committee provides any comments it may have for consideration by the cabinet when it meets on 10 February 2015 prior to their recommendations being taken to Council on 24 February 2015.