Contains Confidential NO
or Exempt Information
Title Housing Revenue Account (HRA) Budget
Responsible Officers Pat Hayes- Executive Director of Regeneration and Housing
Authors Matt Rumble x 8280
Carol Maduka/David Ewart x 7884
Portfolio(s) Cllr Hitesh Tailor (Housing)
Cllr Yvonne Johnson (Finance & Performance)
For Consideration By Cabinet
Date to be Considered 24th January 2012
Implementation Date if 6th February 2012
Not Called In
Affected Wards All
Affected Area All
Keywords/Index Housing Revenue Account (HRA) 30-year business plan, budget
for 2012/13, rents, service charges, Medium Term Financial
Strategy (MTFS) for 2012 to 2014
Purpose of Report:
This report considers the Housing Revenue Account (HRA) and sets out
The proposed tenant rent and service charge level for 2012/13 and for 2013/14
Recommendations for improving the way leaseholder services charges are
administered to costs are recovered.
An update on the 2011/12 budget and forecast outturn
The proposed HRA budget for 2012/13 and medium term financial strategy
(MTFS) for 2012 to 2014
The HRA Capital programme for 2012 to 2015 and the capital programme outturn
The 30-year business model for the HRA under self-financing and the
assumptions underlining the 10/30 year business Model.
1.1 That Cabinet approves:
The Housing Revenue Account budget for 2012/13 as set out in Appendix
1, the updated three year capital programme at Appendix 2 (subject to final
Council approval) and agrees savings totalling £3m bringing the total
achieved to £5m over three years (as set out in Appendix 3).
The medium term financial strategy 2012/13 to 2013/14.
1.2 That Cabinet approves:
Increases to rents and tenant service charges by an average of 6.7% for
Indicative increases to rent and tenant services charges in line with inflation
for 2013/14 (assumed at 2.5%, based on the provisional modelling of the
new financial regime).
Freezing garage charges and rents for HRA shops and commercial
properties for 2012/13 and agrees to the principle of charging in line with
rent review outcomes in 2013/14.
1.3 That Cabinet authorises the Executive Director of Regeneration and
Housing to consult leaseholders on proposed changes to charging for
the leasehold management function carried out by the Home Ownership
Team and delegates authority to the Executive Director of Regeneration
and Housing to restructure the charging system subject to consideration
of responses received through consultation with leaseholders. The
proposal being to move from a percentage of annual bill to a flat fee
charge for all leaseholder from 2013/14 onwards.
1.4 That Cabinet delegates authority to the Executive Director of
Regeneration and Housing to review and set district heating charges,
once the level of gas prices is known to ensure that the Council recovers
the full costs of services.
1.5 That Cabinet note the intention to increase rent and tenant services
charges in line with inflation for 2013/14 (assumed at 2.5%, based on the
provisional modelling of the new financial regime).
1.6 That Cabinet note the revised HRA 2011/12 budget and forecast
outturn position as at November 2011.
1.7 That cabinet note the summary HRA 10/30-year business model
2 Reason for Decisions and Options Considered
2.1 This report is required in order to set the Housing Revenue Account
budget and the level of Council tenants rents for 2012/13. It is proposed
that the 2012/13 rents take effect from 2nd April.
2.2 The Council is required by law to give tenants at least 28 days notice of
any variation to the rent charged.
2.3 To agree this Cabinet needs to consider the 2012/13 budget and MTFS
for 2012 to 2014 and the impact on the longer term 10/30-year HRA
business model that have been prepared to take account of the new
HRA self-financing arrangements.
3 Key Implications
3.1 This report recommends rent and service charges increases for tenants
with effect from 2nd April 2011. The report also recommends the level of
other charges relevant for the HRA and proposals to consult on charging
leaseholders a set management charge towards the cost of the
leasehold management function.
3.2 Growth and savings figures are identified to ensure that all known factors
are taken into account when setting rents and protecting the financial
health of the HRA.
3.3 The report highlights the Medium Term Financial Strategy for the HRA
and provides an indication of the future level of HRA reserves, based on
assumed rent increases, efficiencies and other variables.
3.4 The report also highlights the provisional 30-year HRA business model
prepared for new HRA self-financing arrangements.
Background – The HRA
3.5 The Housing Revenue Account covers revenue expenditure and income
relating to the Council’s own housing stock. It is an account that is ring
fenced from the Council’s General Fund with statutory guidance about
the items that can be charged and credited to it. Generally speaking the
account must include all costs and income relating to the Council’s
landlord role (except in respect of leased accommodation for households
owed a homeless duty). The Council has a legal duty to budget to
ensure the account remains solvent and to review the account
throughout the year.
3.6 2012/13 will mark one of the biggest changes ever in the way municipal
housing in England is funded. From this point onward, Local Authorities
will be entirely responsible for managing their own debt and funding
investment in and repair to their stock. As such an entirely new approach
to looking at housing finance is required and authorities will have to think
thirty rather than one year ahead. From April 2012, a self-financing
model will replace the existing HRA subsidy system.
3.7 This gives authorities financial autonomy and resulting local
accountability for the provision of housing services. Local authorities will
effectively ‘buy out’ or be ‘bought out’ of the existing subsidy system with
one-off payments to or from the Government.
3.8 On the 22nd November 2011 CLG published its consultation on the draft
HRA settlement figure for all authorities. The consultation runs until early
January however the published figures for Ealing can be used to set an
3.9 For Ealing, the settlement figure (the amount CLG will pay the Council to
reduce the level of housing debt) is expected to be £202m. This will bring
the total debt against our stock down to £150m against a total actual
stock value of £200.5m. This in turn means that the Council’s borrowing
headroom will stand at £50.5m in April 2012 (the difference between the
stock value and existing debt).
3.10 Ealing will now need to meet all of its stock improvement, management
and maintenance costs from within this £200.5m borrowing limit figure
and through revenue collected from rent or existing balances.
3.11 Within the new borrowing limits council’s are effectively encouraged to
increase rent year on year in line with or above government guidelines,
which assumes increases above inflation. Revenue surpluses generated
from income exceeding cost can be used to fund future capital stock
improvement and enable new housing to be built. The indirect penalty to
councils for not following guideline rent increases year on year is that
surpluses will not grow, the gap between income and expenditure will
remain the same or decrease, thereby limiting stock investment potential.
3.12 The Housing Department has prepared an indicative 10 and 30 year
business model (appendix 4) which takes account of inflation, interest
charges, ongoing costs and rental income. PWC has been
commissioned PWC to provide advice and support on modelling the
Business Plan in preparation for Self Financing. This business plan takes
account of rent proposals and capital stock improvement and other
housing investment proposals discussed later in this report.
3.13 For the first year operating under the self -financing system a rent
increase of 6.7% is proposed. This level of increase is below
Government assumed rent levels in the rent restructuring guidelines.
Using this formula rent would have increased by 7.7% in Ealing. Other
London Council’s have indicated that their rent levels will be set in line
with Government guideline rent, therefore the increase in Ealing will be
below the trend of other boroughs.
3.14 Setting a rent of below the proposed level, though possible, would
immediately begin to undermine the long-term viability of the HRA. As
Government maximum rent rules will continue to apply, it will be hard to
close a developing gap between costs and income especially as stock
deteriorates as time passes from the completion of the Decent Homes
3.15 A rent increase at a 6.7% average would provide a sound financial base
from which to support the following key housing projects:
A third phase of the Council New Build programme delivering 126
The full high intervention estate regeneration programme;
Essential new investment in sheltered housing schemes – upgraded
alarm systems, improved communal areas and common rooms,
conversions of bedsits to one-bed properties.
The vision for Copley close estate which includes Decent Homes and
environmental improvements to the majority of the estate and a
Council delivered and funded regeneration scheme on viable blocks
on the estate.
Interim maintenance works on high intervention estates prior to their
Disabled adaptations to council properties.
On-going stock improvement programme to maintain decency across
A comprehensive Lift replacement programme.
Estate remodelling and environmental works on other priority estates
not on the HIE list.
3.16 The proposed budget takes account of £2m savings from the
reintegration of housing services delivered in 2011/12 and the further
£3m identified for delivery between 2012/13 and 2013/14 as described in
Appendix 3. The budget is also based on housing management and
maintenance costs having been capped at 0% in 2012/13 and the
intention to keep these at 3% below inflation in 2013/14.
3.17 In the second year, 2013/14, it is then the intention that rent and council
tenant service charges are capped at increases no greater than inflation.
Current Year (2011/12) Budget Review
3.18 The 2011/12 budget and forecast outturn based on November 2011
figures is set out at Appendix 1.
3.19 The 2011/12 forecast outturn is a surplus of £691k reflecting a positive
variance of £745k from the original budgeted deficit of £54k. This is in
addition to the savings delivered from the integration of housing services
in April 2011.
3.20 Key areas of variance are as follows:
Rental & Service Charge Income – forecast reflects a slightly lower than
budgeted loss of income from voids of an average 2.8% on dwellings.
Housing Management & Maintenance – A higher than estimated net
savings expected from the new repairs & maintenance contracts
balanced against budget pressures on leaseholder legal costs.
Subsidy & Capital Charges – increase in subsidy resulting from higher
than budgeted Consumer Retail Index (CRI) is fully offset by a similar
increase in the actual borrowing costs. In addition, there is a reduction
in unsupported borrowing costs as a result of slippages in planned
3.21 HRA balances stood at £6.986m on 1st April 2011. The end of year HRA
balance is predicted to be £7,678m. In addition there are £889k of
balances maintained by Ealing Homes Ltd that are due to be received by
the HRA when Ealing Homes is formally closed, This level of balances is
sufficient to safeguard the HRA.
3.22 The level of capital balances total £37.9m. This includes previously
unspent major repairs allowance of £27.7m; capital costs recovered from
leaseholders contributions from capital schemes and capital receipts for
sale of HRA property or land ringfenced to the HRA. In the coming years
these balances will be used to fund investment in the housing stock,
regeneration and new build housing.
2012/13 Budgets and the Medium Term Financial Strategy (2012-14)
3.23 Set out below are the key proposal contained with in the HRA budget and
are shown in Appendix 1 of this report:
3.24 The HRA self-financing determination contained guideline rent increases
that the government has assumed authorities will charge to its tenants.
These assumed rent increases are set according to government policy
on rent restructuring. The objective of rent restructuring is that similar
affordable rented homes in the same area should have similar rents
regardless of who the social landlord is. The aim is to deliver more
consistent rents and greater transparency for tenants. Under this policy,
properties with lower/higher rents than a government set formula are
assumed to progressively increase/decrease each year to achieve
government’s target. The timeline for rent convergence is by the end of
2015/16 and to achieve this in Ealing the 2012/13 rent would increase
average rent by 7.7%.
3.25 The implementation of HRA self-financing in April 2012 now means the
link between HRA subsidy received and rent charged has been broken.
The Council has the right to set rents using any method that is deemed
reasonable (within a HRA balanced budget) and within the limits set out
in the housing benefit subsidy regulations.
3.26 In 2011/12, the average rent charged to tenants over the year was
£85.97 per week, and this is forecast to lead to total rental income
receipt of £57.0m (allowing for 3% voids).
3.27 The proposed average rent increase for Ealing in 2012/13 is 6.7%,
tracking 1% below the government recommended increase. This
proposal will increase average rent by £5.76 a week, leading to an
average rent of £91.73 a week.
3.28 In the following year, 2013/14 It is intention that rent is capped at inflation
(which, for modelling purposes is forecast at 2.5%).
Income from service charges
3.29 The costs of delivering estate based communal services are recovered
directly from tenants and leaseholders through service charges.
3.30 It is proposed that tenant service charges are increased in 2012/13 in line
with proposals for rents. This would mean an average service charge of
£6.49 per week per tenant in 2012/13, with the recommended 6.7%
3.31 In 2013/14 it is the intention that service charges are increased in line
with the intended rent increase, the inflation level in 2013/14.
3.32 Leaseholders are required by law to pay their share of the actual costs of
services provided to their estates/blocks. These costs are recovered
through service charges calculated and billed by the leaseholder
services section. Leaseholders receive estimated bills in March and the
final bills not more than18 months later, by the following September.
Leaseholder Administration fee proposal
3.33 It is proposed to begin consultation with leaseholders in 2012 on a
change in the way the Council recharges the cost of providing a
leasehold management function.
3.34 The cost of the leaseholder management function to Leaseholders is
paid through an administration fee, which is currently 26% of the total
annual service charge bill. The amount of income recovered from the fee
does not match the actual expenditure of the leasehold management
function, as the fee, being based on a percentage of the cost of the
services provided, will fluctuate if the overall costs of those services
fluctuate. Any gap between the cost of this function and the income
generated by the fee has historically been met by the HRA. In recent
years there has been a gap and this has meant that the HRA has
3.35 This is seen as an unfair charging method by leaseholders, mainly
because a higher service charge bill results in a higher administration
fee, even though the cost of the management service is general the
same for all.
3.36 The financial model for the proposed new method is to charge the same
flat fee to all leaseholders, beginning in April 2013. This will be based on
the total cost of the annual leasehold management function divided by
the number of leaseholders for the same period. Using final budget costs
for 2010/11 a current flat fee to leaseholders would be approximately
3.37 The 2011/12 average fee, using the percentage method, is approximately
£106 per leaseholder. The introduction of a flat fee method will see some
leaseholders facing an increase on what they currently pay whereas
others will pay a significant decrease.
3.38 This new method of charging would mean that council would no longer
risk under recovery of leaseholder management costs and will also
ensure there is a transparent and equitable process for the charging of
Central Heating charges
3.39 The cost of providing central heating services is charged and recovered
from the minority of tenants who live in blocks with district heating
systems. The Council aims to fully recover these costs each year, as
heating charges should not be subsidised by other HRA income.
3.40 The central heating reserve is now fully depleted. This requires the
Council to increase the level of charges needed in 2012/13 to fully
recover costs. It is proposed that authority is delegated to the Executive
Director of Regeneration and Housing to review the level of charges
during the year decide on any increase in charges. Current projections
point to 5% year on year increases in energy costs but this may change
at short notice.
3.41 It is recommended that garage rents be frozen at the current level, which
is an average of £8.11 per week. Budgeted income is £500k in 2012/13.
3.42 It is recommended that rent from HRA commercial properties that are
subject to rent review in 2012/13 be frozen during 2012/13. This reflects
low demand and the need to stimulate local business growth at this time.
Budgeted income is £620k in 2012/13
Savings 2012/13 to 2014/15
3.43 The integration of the Housing Services will deliver £5m savings over
four years. This is being achieved by making operational efficiencies,
eliminating service duplications and streamlining the senior management
structures. In the first year of the new integrated housing service
(2011/12) a total of £2m savings have been delivered mainly from the
deletion of vacant and senior posts and deletion of some support
budgets. The delivery of these savings is complete.
3.44 A further £2m savings have been found and will be delivered in 2012/13
with the remaining £1m in 2013/14 (with a further £100K to be found in
2014/15 following the corporate finance review). These savings will be
delivered from operational savings arising from the integration of housing
services. This includes reorganisation, deletion of duplicate of functions
and accommodation costs. Savings will also be realised from the new
contracts for repairs and servicing.
3.45 All savings proposals are described in a summary of savings for the
years 2011/12, 2012/13, 2013/14 and 2014/15. This is at Appendix 3.
HRA Capital and Revenue Reserves
3.46 The Council’s full level of HRA reserves (both capital and revenue) is
expected to be £46.5m on 1st April 2012. This includes capital reserves
of £38m and revenue reserves of £7.6m plus £0.9m of former Ealing
3.47 It is prudent to retain reserves of at least 5% of total budgeted income,
which means that reserve levels should be maintained at around £3.5m.
Proposed budgets for 2012-14 include use of existing reserves to fund
the capital programme, which is described in more detail later in the
Reserves summary – estimated as at 31 March 2012
3.48 Revenue reserves £8.6m
3.49 Capital reserves
Major Repairs Reserve (MRR) £27.7m
Leaseholder contributions £7.9m
Capital receipts £2.3m
Management and maintenance budgets
3.50 The proposal in the medium term financial strategy is that Management
and maintenance be caped at 3% below inflation in 2013/14 delivering a
further saving based on current inflation assumptions. These savings are
additional to those described in Appendix 3. The overall management
and maintenance costs are part of the budget in Appendix 1
Provisions for Bad Debt and Ealing Homes Pension Deficit
3.51 Provision is included for bad debts and in light of the proposed changes
to Housing Benefits it is proposed to increase this provision in 2013/14.
3.52 Ealing Homes had a deficit on its element of the Council’s pension fund
and was paying higher contribution rates. Advice is being sought on how
this should now be reflected, but a provision of £500k pa has been
included in the budget in case a charge is required to be made to the
HRA. If not required, this will become available for further investment.
Capital programme 2012-15
3.53 The new HRA financial regime and our associated rent income base will
allow the Council to develop the HRA capital programme beyond the
current level of planned maintenance and newly arising Decent Homes
works. On Copley Close this improved resource base will enable a
‘Decent Homes Plus’ programme on all of the retained properties, which
will also include some estate remodelling works. Part of the Council’s
overall vision for the Copley Close is to invest in the redevelopment of
parts of the estate where this is not prevented by the proximity of the
railway tunnel, and introduce a mixed tenure element to the stock. The
housing regeneration team are working up options to identify blocks and
tenure-mix for a Council funded and delivered regeneration programme.
The principal costs of one regeneration schemes has been included in
three year capital programme and the long term budget model.
3.54 Following this work at Copley Close there will be an opportunity for
additional modernisation and remodelling on other estates not in the
Council's regeneration programme but nevertheless having a poor
physical environments and significant socio-economic needs. These
estates will be drawn from the 14 Medium Level Intervention estates that
were identified in the Council's Estates Review in 2008. These include
estates right across the borough such as Medlar Farm, High Lane and
3.55 The proposed three-year capital programme as well as the 2011/12
capital programme outturn is summarised below and the budget included
in Appendix 2 of this report. Under the new HRA arrangements funding
for the capital programme is to be managed across the whole
programme instead of by individual scheme. This will provide the
flexibility required to adequately fund and manage what are complex
Stock improvement capital programme
3.56 The revised capital programme will includes the £1.1m each year for
additional disabled adaptations to Council Housing Stock.
3.57 Following the Sheltered Housing Review the capital programme will also
deliver upgrades to the common rooms and common areas, an improved
warden call system and will make provision for a conversion programme
of bed-sits to one bed properties.
3.58 Other capital improvement items:
Lift replacement, electrical rewires and fire safety programmes
Provision for future interim works on High Intervention Estates (HIEs)
– such as South Acton and Havelock.
Budget to plan estate modernisation and remodelling work on
medium level intervention estates.
Council New Build programme
3.59 The third phase of the Councils New Build programme has been included
in the base HRA budget model. The total programme is split over three
years with the total cost of £18.8m, offset by £3.7m Homes and
Communities Agency (HCA) grant. A total of £15.1 has therefore been
built in to the HRA capital programme for 2012/13 to 2014/15.
3.60 The third phase of the programme is still in development, however the
programme should generate 126 new homes across the borough.
Regeneration enabling programme
3.61 The full enabling costs of the Council Regeneration programme have
been included in the HRA capital programme for the next three years
and the 10/30-year budget model. Over the course of the programme the
Council’s estate regeneration model is cost neutral. The enabling costs
are for buying back properties from leaseholders, which on the transfer
of land to the developer partner for each scheme, are recovered entirely.
This does however have an impact on capital cash flow/reserves, as the
capital outlay for ‘buy backs’ is often not recovered for 18 months to two
years. Large regeneration schemes can therefore deplete capital
reserves for a number of years, impacting on our ability to fund other
capital investment schemes.
3.62 There is also an allowance within the enabling programme to accelerate
the regeneration of Rectory Park estate.
3.63 Over the next three years the planned regeneration-enabling programme
will have a net cost of £22.6m with these costs generally being recovered
in years 2017/18 onward.
One-off capital budgets
3.64 The capital programme as described in Appendix 2 also includes some
items, which have been included in the capital budget for 2012/13 only
with no further provision as yet made for future years.
Street Properties - £700k in 2012/13 for the conversion of street
properties to large family homes
Homebuyers Grant – £300k in 2012/13 to help tenants purchase
properties in the private sector and free up larger family homes.
3.65 The Capital programme described above can be funded through capital
reserves and revenue HRA budget without reserves dropping below the
recommended level or additional borrowing being required.
Copley Close Regeneration
3.66 As described above, the capital programme includes the costs of the
regeneration of part of the Copley close estate as well as delivering the
planned ‘Decent Homes plus’ programme.
3.67 The current proposal is for a Council led and funded redevelopment of
three blocks with the loss of 54 tenanted and 12 leasehold properties
resulting in the development of 213 new units and significant
environmental improvements/estate remodelling across the wider estate.
3.68 The proposed regeneration scheme would be delivered over three years
at an estimated cost of £44m. The scheme would return £35m over four
years from the sale of the new additional homes. This option would
require capital borrowing of £8m in 2013/14, which would be repaid in
2015/16. The short-term additional borrowing costs are included in the
3.69 Further work is still required to determine the mix of new homes, which
could be put to market for sale, discounted sale or retained for market,
affordable or social rent. This will in turn affect the Council’s future
borrowing headroom, stock numbers and rental income.
4 Financial Implications
4.1 The whole of this report is concerned with the financial position of the
Council's HRA. Under the provisions of the Local Government and
Housing Act 1989 the Council is required to prepare a budget that will
ensure that the HRA is not in deficit.
4.2 The Government's switch from a system of housing subsidy
determination has a major effect on the Council's HRA The impact of the
Determination and its effect on the rent restructuring arrangements are
4.3 The Executive Director Corporate Resources advises that he has
reviewed the proposed budget and wishes to draw the following risks to
Rent Collection – with the proposed changes in the Housing Benefit
(HB) system, particularly the move to the payment of rent rebates
directly to the majority of tenants under the Universal Credit, the
achievement of current rent collection levels must be brought into
question. Although the budget plans contain provision for increased
bad debts and plans to mitigate the fall in collection rates are in place,
these changes clearly present a very real risk to the viability of the
HRA business plan.
The funding without recourse to borrowing of regeneration and other
capital works following 2013/14 depends on high levels of capital
receipts as a result of regeneration and other schemes. Although
there is nothing to suggest at this stage these receipts will not be
achieved, the reliance on this form of funding does mean that the
HRA may require additional loan finance if these receipts are delayed
or become unachievable.
2012/13 is the first year of the new HRA self-financing system, and
although considerable modelling and preparatory work has been
undertaken, a risk will remain until the new system is fully operational
and has been working for a reasonable period.
4.4 In view of the above risks and the level of HRA revenue balances, I
would be unable to recommend a budget that was based on a level of
rent increase that was not at least at, or near, that recommended in this
4.5 However, Members should be aware that the HRA budget setting
process is designed to produce a robust estimate of income and
expenditure for 2012/13 and future years. The budget has been subject
to considerable examination by the Council's officers. The saving
proposals have been considered in detail by the departmental
management in preparing their budget proposals.
4.6 The HRA budget proposals are presented by its Portfolio holder and
Executive Director at the Budget Review meetings for the HRA, which
are chaired by the Leader of the Council and attended by senior officers
and members including the Portfolio Holder for Finance and
Performance, the Chief Executive, and myself. The Budget Review
discussions are held at a detailed level and contain a significant and
robust element of challenge. The revenue impact of decisions
concerning capital spending is considered and incorporated in the
4.7 On the basis of the above and subject to careful monitoring of the move
to and working of the self-financing system and HRA budget generally, I
am satisfied that the 2012/13 budget is realistic and the level of balances
is sufficient for the year.
5 Legal Implications
5.1 The Local Government and Housing Act 1989 introduced the ring fenced
HRA with effect from 1st April 1990 placing a duty on local authorities to
formulate proposals which will ensure that the HRA for the year does not
show a deficit balance provided the following assumptions prove to be
The best assumptions made at the time as to all matters, which
may affect the amounts falling to be credited and debited to the
HRA for the year.
The best estimates that they are able to make at the time of the
amounts, which, on the above assumptions, will fall to be credited
or debited to the HRA.
The HRA is the account for the Council's housing stock and there is
no power to subsidise the HRA from the General Fund or to
transfer, surpluses out of the HRA account. In this way the account
is 'ring fenced'.
Local authorities have a responsibility to review the account from
time to time, and if a shortfall is projected, to take reasonable
practical steps to balance the account.
5.2 The Housing Act 1985 and the Local Government and Housing Act 1989
constrain the budget making process in respect of the Housing Revenue
Account in a number of ways:
The Council cannot set the HRA budget in such a way which will
result in a deficit at the end of the financial year (although if, through
circumstances which could not have been foreseen, a deficit were to
arise, it can be made good in the following financial year); and
Rents must be set at a “reasonable level”, and that level must be
reviewed from time to time.
The Council must formulate their housing revenue account budget no
later than the end of February.
5.3 Sections 167 to 175 of the Localism Act 2011 provided for the ending of
the Housing Subsidy system and its replacement with a system of self-
financing. The Act provides the Secretary of State for Communities and
Local Government with the powers to require authorities to assist in the
move to self-financing.
6 Value For Money
6.1 The strategy reflects planned efficiency saving in housing management
costs. Savings identified in the 2012/13 to 2014/15 years are set out in
Appendix 3. A 3-year analysis of management and maintenance unit
costs reflecting anticipated reductions is set out below:
2011/12 2012/13 2013/14
Average stock for
year 13,078 13,051 12,760
per unit 1,494 1,125 1,093
per unit 1,232 1,242 1,243
7 Sustainability Impact Appraisal
7.1 The HRA funds repairs and maintenance work to improve the
sustainability of our housing stock, including improvements in thermal
efficiency to reduce carbon emissions.
8 Risk Management
8.1 The major risks to the HRA and its budget can be divided into two
groups; first those affecting most authorities with retained housing stock;
and second specific risks for Ealing.
HRA self financing means the Council is no longer be subject to an
annual subsidy determination – but now bears a greater risk form
inflation and interest rate rises under the system of self financing.
The sensitivities around self-financing have been modelled in the
30-year business plan outlined above.
The loss of tenanted stock from 25,000 properties in 1980 to just
over 13,000, in 2011/12 through right to buy sales, the ending of 20-
year leases and stock loss from estate regeneration results in
reduced rental income. This puts financial pressure on the service
where costs cannot be reduced accordingly. Future stock loss
would require increased efficiencies in order to safeguard the HRA.
With likely changes in the RTB discount and the way self-financing
works additional loss of stock could result in significantly increased
With almost 5,000 leaseholders the management of this function
and collection of leaseholder service charges is a major activity.
Increasingly leaseholders are concerned about the level of charges
being levied and the increasing challenge on these charges put
level of estimated income at risk.
The proposed changes in the way Housing Benefits are paid may
impact the council’s ability to collect rent. Arrangements under
universal credit proposals will see housing benefit paid directly to
the individual rather than to the council. In times of hardship this
may see the council competing with other service providers for
tenants income, which will place a financial risk to the HRA.
The estate regeneration projects expose the HRA to costs where it
must forward fund consultation and project development costs
before a developer partner is selected. In previous years £6m has
been charged to the HRA, which is yet to be fully recovered from
the projects. However a major change in regeneration strategy in
the last 24 months has introduced measures to help mitigate further
risk and enable a greater number of schemes to proceed in line with
tenants’ aspirations. However, a large amount of forward funding is
still required, and this may bring an element of risk to the HRA.
9 Community Safety
9.1 The HRA contributes to the Council’s objective of reduction of anti-social
behaviour (ASB) through a range of initiatives from enforcing tenancy
conditions, and funding a number of officers to work on ASB cases to
providing facilities and activities for young people.
10 Links to the 5 Priorities for the Borough
10.1 The Housing Revenue Account budget has been configured to ensure
delivery of the Council’s strategic objectives in respect of the housing stock.
The management of the housing stock makes a substantial contribution to
the Council’s corporate vision and all 5 priorities, and thus addresses
national policies and priorities.
Securing Public Services
The HRA contributes to the management and maintenance of
Ealing’s housing estates and wider council housing stock.
Securing jobs and homes
As noted above, the HRA contributes to the management and
maintenance of Ealing’s council owned housing estates and wider
council housing stock. The service also provides secure sheltered
accommodation for older people as well as supported housing
services. In addition, the housing service undertakes several
worklessness schemes through its partnership work on
regenerating housing estates. Through this, Ealing ensures that a
comprehensive jobs and skills training programme for local
residents is provided by the developer partners.
Making Ealing Safer
The HRA contributes to the reduction of anti-social behaviour (ASB)
through a range of initiatives from enforcing tenancy conditions to
providing facilities and activities for young people and children with
families through partnership working, to meet the Council’s priority
of achieving safer communities. In addition the comprehensive
regeneration process underway on several of the councils estates
will enable high quality design to be incorporated ensuring improved
levels of safety and security for residents complying with the
“secured by design” guide.
Delivering Value for Money
Section 6 of this report, describes in detail how VFM is being
implemented both in the new integrated housing services and the
efficiency savings outlined in Appendix 1 support the Council’s
strategic objective of improved value for money.
Making Ealing Cleaner
The HRA also supports services to Council estates in respect of
estate cleaning, refuse collection, graffiti removal as well as the
removal of abandoned vehicle and grounds maintenance. All of
these activities contribute significantly towards the Council’s priority
to achieve cleaner streets.
11 Equalities and Community Cohesion
11.1 An equalities impact screening assessment has been carried out on the
budget proposals that does not identify a need for a full equalities impact
assessment for this decision.
11.2 A full equalities impact assessment has been carried out on the proposed
rent and service charge increase, identifying some differential impact on
equalities groups. This is described in appendix 5.
12 Staffing/Workforce and Accommodation implications:
12.1 The proposals provide for a reduction in the current level of Council staff
and accommodation except where stated. The proposed reductions include
provisions for savings from a reduction in staffing costs from the new
integrated housing services; the reorganisation required will be the subject
of a series of reports to Cabinet and formal consultation.
13 Property and Assets
13.1 The Council has already given notice to terminate its leasehold interest on
Westgate House, with staff having vacated the premises during 2011/12.
14 Any other implications:
15.1 The budget proposals will be presented to the Resident Council on 16
15.2 A consultation plan for proposed leaseholder management fee changes will
be developed in time for consultation to commence in February 2012.
16 Timetable for Implementation
5/01/12 Training for tenant representatives
16/01/12 Residents’ Council Business Planning
24/01/12 Cabinet meeting
Week beginning Letter to all tenants giving notice of rent
28/03/12 Self financing debt settlement
01/04/12 Start of self-financing
02/04/12 Rents increase effective
Appendix 1 - HRA 2yr budget summary 2012 to 2014.
Appendix 2 - HRA 4yr Capital Programme summary 2011 to 2015.
Appendix 3 - Savings schedule.
Appendix 4 - HRA 10/30-Year Business Model
Appendix 5: EIA
18 Background Information
HRA Item 8 and Self-Financing Determination 2012/13.
HRA budget report 2011/12 to cabinet 25h January 2011.
Name of Post held and Date Date Comments
consultee Department Sent to response appear in
consultee received paragraph:
Ian O’Donnell Executive Director 10 Jan 2012 13 Jan 2012 Section 4
Pat Hayes Executive Director 10 Jan 2012 13 Jan 2012 Throughout
Peta Caine Asst Director 10 Jan 2012 13 Jan 2012 Throughout
David Ewart/ Director of Finance, 10 Jan 2012 Various Throughout
Carol Maduka Regeneration &
Catherine Taylor/ Head of Legal 10 Jan 2012 10 Jan 2012/ Throughout
Keith Robertson (Litigation) 13 Jan 2012
Cllr Yvonne Johnson Cabinet Member for 13 Jan 2012
Cllr Hitesh Tailor Cabinet Member for 11 Jan 2012 13 Jan 2012 Throughout
Decision type: Urgency item?
: Key decision No
Authorised by Cabinet Date report drafted: Report deadline: Date report sent:
member: 13.01.2012 16.01.2012 16.01.2012
Report no.: Report author and contact for queries:
Matt Rumble ext
David Ewart ext 7884