Housing Revenue Account - 2023-24 Revenue Estimates
North Lanarkshire Council · 15 February 2023
Back to Housing Committee — 15 February 2023 and its agenda
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North Lanarkshire Council Report Housing Committee Does this report require to be approved? ☐ Yes ☒ No Ref EK / GT Date 15/02/23 Housing Revenue Account – 2023/24 Revenue Estimates From Elaine Kemp, Chief Officer of Finance E-mail kempe@northlan.gov.uk Telephone 01698 302408 1. Background 1.1 Income and expenditure in relation to a local authority’s own direct provision of housing must be recorded within a Housing Revenue Account (HRA) as set out in the Housing (Scotland) Act 1987. In addition, this Act sets out the requirement for local authorities to set an annual budget to support sound financial management and helps ensure that expenditure is linked to the key priorities of tenants. 1.2 North Lanarkshire is Scotland’s largest local authority landlord, with a housing stock of approximately 36,000. The number has reduced marginally over the last year reflecting the impact of tower re-provisioning, partially offset by additions to the stock through the Council’s new supply programme and buy back schemes Executive Summary The purpose of this report is to present to Committee information that will enable the Council to set its Housing Revenue Account (HRA) budget and rent levels for 2023/24. Recommendations It is recommended that Committee: (1) Recognises the HRA cost pressures detailed in Appendix 1, (2) Recognises the base budget savings outlined in Appendix 2, (3) Considers the allocation of HRA surplus balances as detailed in paragraphs 2.3, 2.4 and 2.5, and (4) Agrees to review the financial assumptions contained within this report at the Special Council meeting February 2023 to approve the HRA Revenues Estimates and rent levels for 2023/24. The Plan for North Lanarkshire Priority Improve North Lanarkshire's resource base Ambition statement (25) Ensure intelligent use of data and information to support fully evidence based decision making and future planning
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1.3 The Council approved its 2022/23 HRA budget of £149m on 16 December 2021 with £142m (95%) funded by rental income from tenants and £7m (5%) from other fees and charges. 1.4 The average 2022/23 weekly rent in North Lanarkshire of £76.50 is the ninth lowest amongst Scottish local authority landlords and 3.2% below the Scottish local authority average. The recent Landlord Report published by the Scottish Housing Regulator shows North Lanarkshire Council’s rents are between 11.7% (for a 1 apartment) and 17.0% (for a 2 apartment) below the Scottish average for all social housing rents. 1.5 In setting the HRA budget and rent levels in December 2017, the Council agreed to an average rental increase of 5% for 2018/19 and 5% for the subsequent three years up to 2021/22. For 2022/23 the rent increase was set at 3%, an average increase of £2.27 per week. 1.6 Committee has received regular updates on the progress of delivering the Council’s ambitious plans for housing through the Economic Regeneration Delivery Plan. This has been further strengthened through The Plan for North Lanarkshire approved in March 2019 with specific focus on three key programmes of work supported by the current rent strategy: • PO13 – New Supply Programme • PO14 – Tower Strategy • PO15 – Housing Investment Programme 1.7 Significant progress to date includes: • An increase in the target for new supply housing from 2,150 by 2027 to 5,000 by 2035, • Completion of 970 new build homes with a further 421 on site. Sites have been identified and are at various stages of progression for a further 1,346 homes, • Expansion of the buy back scheme which will allow around 130 properties to be brough back into use each year. 606 homes have been purchased through the Council Buy Back Schemes at 9 January 2023, • The approval, development and ongoing delivery of plans for investment and re- provisioning of the Council’s tower properties, • Approval of a 5 year mainstream capital programme from 2021/22 to 2025/26 that aims to deliver £354m of investment in the Council’s housing stock; greater than 20% increase from the previous 5 year planning period. 30-year Business Plan 1.8 The 30-year Business Plan included as part of the 2023/24 budget setting process is shown in Appendix 3. Financial Solutions has worked closely with Housing Property and Projects and the New Supply Team to confirm future investment targets to support the development and refinement of financial modelling. The 30-year Business Plan continues to demonstrate affordability and sustainability of plans based current assumptions. Housing Benefit / Universal Credit 1.9 During the mid point of the current financial year, North Lanarkshire had 23,400 tenants in receipt of some form of support for their housing costs, representing more than 67% of tenants. Almost 34% of tenants are now in receipt of the housing cost element of Universal Credit and a further 33% are in receipt of Housing Benefit. 1.10 A rent increase would result in some tenants receiving more Housing Benefit and some existing non-claimants becoming entitled to Housing Benefit. However, unless their
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circumstances change, most tenants will be liable for the same contribution towards their rent, with Housing Benefit making up the difference. 1.11 Tenants currently entitled to the full housing cost element of Universal Credit would have their Universal Credit payment uplifted to reflect any rent increases up to the Local Housing Allowance cap. 1.12 Following approval at the former Housing and Regeneration Committee in November 2019, the Council established the Universal Credit Assistance Fund (UCAF). This was expanded to include the Covid Hardship Fund in June 2020. Nearly 10,000 tenants have been supported that would otherwise have fallen into arrears. In addition, in accessing these funds tenants have been provided with additional support and advice and signposting to other agencies where required ultimately contributing to longer term sustainability of tenancies. 1.13 In addition, funding provided by the Scottish Government to support Covid-19 recovery and the cost of living crisis has seen a further 719 tenants supported through the Tenant Hardship Fund and Local Authority Covid Economic Recovery Fund. 1.14 Together these measures have ensured the Council has seen a stable position for rent arrears for current tenants with the arrears balance remaining largely unchanged throughout the current financial year where other landlords are experiencing increasing current tenant arrears. 2. Report HRA Revenue Estimates 2.1 In assessing the budgetary requirements of the Housing Revenue Account for 2023/24, a number of variables and factors have to be considered and analysed before determining the adjustments required in the base budget position. These base budget adjustments are outlined in Appendices 1 and 2, with the main factors described below: 2.1.1 Cost Pressures of £10.314m to ensure that the HRA can continue to deliver a highly performing repairs and maintenance programme, effective housing management and support and deliver the approved capital programme, including: • Employee cost pressures totalling £1.375m, incorporating an adjustment for the higher than originally budget pay award for 2022/23 and an anticipated pay award for 2023/24 in line with the Council’s Medium Term Financial Plan assumptions and the ongoing impact of incremental pay pressures. The HRA will also benefit from the UK Government’s decision to reverse increases in National Insurance contributions. • The cost of funding capital investment including prior year expenditure and approved investment targets in line with the existing 30-year Business Plan (£4.992m). However, this is largely offset by the release of historic recurring Ambition funding set aside to support capital investment plans (£4.879m). • Inflationary pressure on repairs and maintenance expenditure linked to wider economic factors and the increasing price of goods and services throughout 2022/23 (£6.796m). However, it is anticipated that inflation impacting on repairs and maintenance will reduce from its current high levels during 2023/24. • Other inflationary pressures for energy and other services (£2.030m)
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2.1.3 Base Budget Savings are considered each year to ensure that the HRA continues to direct its resources towards key priorities. Appendix 2 outlines base budget savings of £0.070m to be implemented by the service in 2023/24. 2.1.4 The combined impact of these cost pressures and partially offsetting savings is a funding gap of £10.244m. This can be summarised as follows: £m Cost Pressures (see Appendix 1) 10.314 Base Budget Savings (see Appendix 2) (0.070) Funding Gap 10.244 2.2 A rental increase of 7.15% would be required to bridge the funding gap. 2.3 Members will be aware of the Scottish Government’s Cost of Living (Tenant Protection) (Scotland) Act 2022 which introduced a rent freeze for all landlords until 31 March 2023. The Scottish Government intends to make regulations to lift the rent freeze for the social housing sector from 1 March 2023. These regulations would allow the Council to increase rents effective from 1 April 2023. 2.4 Members will also be aware of the commitment agreed through COSLA to keep rental increases to an average of less than £5 per week across the country. For North Lanarkshire Council, maintenance of that commitment will limit the potential rent rise to circa 6.5% for 2023/24. Use of Surplus Balances 2.5 As part of its long-term HRA budget strategy, it is the Council’s policy to set aside approximately 1% of the HRA budget as a core reserve. As a result, the core reserve currently stands at £1.470m. 2.6 In addition, the HRA reserve balances include a Change Management / Risks & Uncertainty reserve of £5.155m and a reserve balance to support Ambition related activity of £5.054m. This excludes the surplus currently projected for 2022/23 of £1.000m. 2.7 Elected Members are reminded of the Council’s Reserves Policy approved at Policy and Strategy Committee in January 2020 which aims to ensure that available balances are managed and utilised in accordance with effective governance principles and continue to support financial plans which are affordable and sustainable. 3. Measures of success 3.1 The Council is required to set a balanced budget for the Housing Revenue Account with expenditure plans fully funded by income, largely from housing rents. 3.2 The setting of an annual budget and thereafter monitoring the budget ensures that tenants can have confidence that the Council and its officers are accountable for the spending decisions they make.
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4. Supporting documentation Appendix 1 Cost Pressures 2022/23 Appendix 2 Base Budget Savings 2022/23 Appendix 3 30-year Business Plan Summary Elaine Kemp Chief Officer of Finance
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5. Impacts 5.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☒ No ☐ If Yes, please provide a brief summary of the impact? The HRA budget for 2022/23 will ensure that the Council can continue to provide a highly effective and responsive housing management service for all tenants and improve the health and wellbeing and economic outcomes of communities through the delivery of significant additional capital investment in high quality and affordable social housing. If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality- and-fairer-scotland-duty-impact-assessments Yes ☒ No ☐ 5.2 Financial impact Does the report contain any financial impacts? Yes ☒ No ☐ If Yes, have all relevant financial impacts have been discussed and agreed with Finance? Yes ☒ No ☐ If Yes, please provide a brief summary of the impact? The financial implications of the 2023/24 Revenue Estimates are outlined throughout the report. 5.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ If Yes, have all relevant HR impacts have been discussed and agreed with People Resources? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☐ No ☒ If Yes, have all relevant legal impacts have been discussed and agreed with Legal and Democratic? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐
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If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐ 5.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? Where the impact identifies a requirement for significant technology change, has an assessment been carried out (or is scheduled to be carried out) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 5.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.9 Risk impact Is there a risk impact? Yes ☐ No ☐ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g. Corporate or Service or Project Risk Registers), and how they are managed? All activities undertaken by the council are subject to risk, and in acknowledging the Council’s approved Risk Management Strategy (September 2012), Services manage these as part of their overall corporate and service planning process. The current economic climate, in particular, has the potential to impact upon the Council’s ability to provide quality services within approved budget levels. The Government’s proposals for welfare reform include a number of changes to the housing benefit system which present significant financial risks to the HRA, including increasing rent arrears and cash collection costs, combined with lower levels of rental income. These risks are increased by the current and potentially ongoing economic impact of the Covid-19 pandemic. These risks will be closely monitored throughout 2023/24. 5.10 Armed Forces Covenant Duty Does the report require to take due regard of the Armed Forces Covenant Duty (i.e. does it relate to healthcare, housing, or education services for in-Service or ex- Service personnel, or their families, or widow(er)s)? Yes ☐ No ☒ If Yes, please provide a brief summary of the provision which has been made to ensure there has been appropriate consideration of the particular needs of the Armed Forces community to make sure that they do not face disadvantage compared to other citizens in the provision of public services.
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Appendix 1 Housing Revenue Account Cost Pressures 2023/24 £000 £000 Employee Costs Pay awards 1,479 Incremental drift 176 Reduction in National Insurance and other cost reductions (280) 1,375 Inflationary Pressures Housing repairs inflation and stock movements 6,796 Trading and support service costs 1,250 Energy costs 1,107 9,153 Capital Financing Costs Loan charges associated with increased capital investment 4,992 Release of Ambition funding to support capital investment (4,879) 113 Movement and profile of housing stock (327) Cost Pressures Total 10,314
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Appendix 2 Housing Revenue Account Base Budget Savings 2023/24 £000 Property Costs Reduced costs associated with both close cleaning 50 Other Operational Efficiencies Reduced operational delivery costs linked to office expenditure and uniforms / protective clothing 20 Total base budget savings 70
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Appendix 3 Housing Revenue Account 30 Year Business Model Summary 30 Year Year 2020/25 2025/30 2030/35 2035/40 2040/45 2046/50 Totals Average Mainstream Housing Stock 34,930 34,224 33,519 32,779 32,575 32,575 New Build Housing Stock 1,252 2,214 2,986 3,312 3,358 3,358 Average Housing stock 36,182 36,439 36,505 36,091 35,933 35,933 Capital Investment £000 £000 £000 £000 £000 £000 £000 Prudential borrowing 307,405 554,539 649,413 700,776 928,535 536,936 3,677,604 Capital receipts 32 0 0 0 0 0 32 Other receipts / Government Grants 88,654 90,944 55,818 5,457 0 0 240,873 Sub total 396,091 645,483 705,231 706,233 928,535 536,936 3,918,509 CFCR 141,395 125,731 123,231 123,230 123,230 123,230 760,047 Total resources 537,486 771,214 828,462 829,463 1,051,765 660,166 4,678,556 Loan Analysis Opening debt 324,109 582,972 1,048,747 1,546,458 2,015,481 2,640,866 324,109 Prudential borrowing 307,405 554,539 649,413 700,776 928,535 536,936 3,677,604 Principal repayment - historic debt 42,481 49,673 60,402 73,085 50,336 30,382 306,359 Principal repayment - new borrowing 6,061 39,091 91,300 158,668 252,814 378,499 926,433 Closing debt 582,972 1,048,747 1,546,458 2,015,481 2,640,866 2,768,921 2,768,921 Per house (£) - Closing Stock 16,112 28,782 42,363 55,844 73,494 77,058 77,058 Housing Revenue Account 123,055 241,810 400,970 601,009 808,636 1,061,510 3,236,990 658,790 723,485 801,023 884,577 984,812 1,100,100 5,152,787 781,845 965,295 1,201,993 1,485,586 1,793,448 2,161,610 8,389,777 Other income (71,978) (54,960) (54,960) (54,960) (54,960) (54,960) (346,778) Balance to be financed by rents 709,867 910,335 1,147,033 1,430,626 1,738,488 2,106,650 8,042,999 Average weekly rent (£) 78.12 97.78 122.82 153.59 186.08 225.49 Rental Income 709,867 910,335 1,147,033 1,430,626 1,738,488 2,106,650 8,042,999 Average Yearly % increase 4.58% 4.66% 4.54% 4.30% 4.20% 3.26% Capital charges as a % of rent income 17.33% 26.56% 34.96% 42.01% 46.51% 50.39% 5 Year Bands Loan charges Other costs