Medium Term Financial Strategy 2023-24
5. Housing Revenue Account
5. Housing Revenue Account
- 5.1. Since the introduction of self-financing in 2012, the Housing Revenue Account (HRA) business plan has continued to be challenged by several changes. Right to buy (RTB) discounts have increased, rent-setting policy has changed and the current inflationary pressures places further challenges on the HRA.
- 5.2. The recent strategy for the HRA has been to keep the HRA reserves levels sufficient to mitigate any loss of revenue. The Council continues to be prepared for further reductions in resources available to manage, maintain, improve and add to its housing stock.
- 5.3. The contract for the provision of the maintenance and repairs service to the housing stock is currently provided by Great Yarmouth Norse (GYN) and comes to an end in September 2024, a project is currently underway for the future provision of the service which will see the Council taking full control. The GYN service has been undergoing transformation and it is anticipated that this will deliver efficiencies to the service. The full size of these savings will not be identified until the new model of delivery is confirmed and the budget setting process for 2024/25 and 2025/26 is underway as the implications of the overheads are yet to be quantified.
- 5.4. Additional borrowing currently maintains the affordable housing programme to comply with the RTB agreement. The current RTB regulations allow RTB receipts to be used to support up to 40% of the scheme cost of replacement homes, the time restrictions require that sale receipts must be utilised within five years from the sale of the dwelling.
- 5.5. Most fees and charges relating to the Housing Revenue Account have been increased in recent years in line with the corporate formula adopted by the Council, RPI + 2%, aiming to close the gap in terms of recovery of costs.
5.6. Rent setting policy
- The Government set a cap for housing rents of 7% for 2023/24. Prior to this social landlords had been permitted to increase rents by CPI +1% (this had been in place since 2020/21). Without the cap, rents would have been allowed to increase by a maximum of 11.1%. No guidance has been issued on rent capping for 2024/25, currently if there is no capping rent increases could be to a maximum of 7.7%. Currently the HRA Business Plan assumes that cap was in place for one year and from 2024/25 the increases revert to the CPI +1%.
5.7. Right To Buy discounts and retained receipts
- Right to buy discounts have increased since the introduction of Self Financing, the maximum discount increases each year based on the consumer price index (CPI). The business model has been amended to incorporate this change.
- 5.8. The HRA is still part of a retention agreement, where the HRA can retain receipts, to support up to 40% of the cost of replacement homes if incurred in a five-year period. If retained receipts are not used, the Council is liable for repayment of the receipt plus interest, sales and receipts are therefore closely monitored to mitigate any repayment liabilities.
- 5.9. The Council has set out a plan and ambition to use retained receipts to develop affordable council housing and to further increase the supply of affordable housing using a combination of four options:
- grant contribution to Housing Association development
- development of new build homes
- purchasing empty homes on the open market
- purchase of suitable properties on the open market
5.10. HRA Borrowing
- Following the removal of the HRA borrowing cap in 2018 the Council is able borrow against its housing assets as long as it can demonstrate affordability. The Council continues to actively review the best way to utilise the additional borrowing capacity within the HRA, to deliver further affordable homes within the Borough. The council plans to utilise revenue savings to finance additional borrowing within the HRA, along with the use of accrued 1-4-1 receipts, which may have otherwise been repaid to government along with the relevant interest.
- 5.11. Overall, the aim is to increase the levels of new housing within the existing housing stock and to increase net rental income received. The HRA continues to model the implications to the housing business plan, as well as identifying potential sites for the delivery of additional housing. Increased borrowing for the HRA will need to be able to demonstrate affordability and informed decisions taken to understand the longer-term impact to the HRA funding.
- 5.12. There are two key strands to the Council's HRA investment plans:
- maintaining and improving the housing stock
- new affordable council housing, including new housing to replace sales under RTB in line with Government guidance
- 5.13. The plans are prepared over the medium term and are reviewed and updated annually. Future investment decisions will be based on local decision making and local knowledge of the condition of the stock and the components.