Housing Revenue Account (HRA) Strategic Financial Plan Incorporating The 5 Year Capital Investment Programme And Rent Strategy To 2029/30, Reserves Strategy And Other Housing Charges For 2025/26
Perth and Kinross Council · 22 January 2025
Back to Housing and Social Wellbeing Committee — 22 January 2025 and its agenda
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PERTH AND KINROSS COUNCIL Housing and Social Wellbeing Committee 22 January 2025 HOUSING REVENUE ACCOUNT (HRA) STRATEGIC FINANCIAL PLAN INCORPORATING THE 5 YEAR CAPITAL INVESTMENT PROGRAMME AND RENT STRATEGY TO 2029/30, RESERVES STRATEGY AND OTHER HOUSING CHARGES FOR 2025/26 Joint Report by Strategic Lead - Housing and Communities and Strategic Lead – Finance and Business Support (Report No. 25/9) 1. PURPOSE 1.1 The report seeks approval of the proposed Housing Revenue Account (HRA) budget for five years from 2025/26 to 2029/30. It outlines recommended increases to rents for houses and other HRA property service charges, and an appropriate level of reserves. It also seeks approval of the proposed budget for the next five years of the Capital Investment Programme, totalling £90.6 million from 2025/26 to 2029/30. 2. RECOMMENDATIONS 2.1 It is recommended that the Housing & Social Wellbeing Committee: (i) notes that the HRA 30-year Business Plan has been updated to reflect and confirm the affordability of the proposals. (ii) approves the Housing Revenue Account Budget for 2025/26 and provisional budgets for financial years 2026/27 to 2029/30 as set out in Appendix 1. (ii) approves the proposed Housing Revenue Account Capital Investment Programme for 2025/26 to 2029/30 as set out in Appendix 3. (iii) approves the Rent Strategy for 2025/26 and a provisional Rent Strategy for the following 4 years to 2029/30 as stated in Section 9. (iv) approves the rent increase of 6.0% in line with option 1, for the year commencing 7 April 2025 for all Council houses. This would mean an average weekly rent increase of £4.78 per week, giving an average weekly rent of £84.52 per week based on 52 weeks. (v) approves the rent increase of 6.0% for the year commencing 7 April 2025 for: • all lock-ups • all garage sites
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• dispersed tenancies owned by the HRA • Greyfriars Hostel. (vi) approves the Housing Revenue Account Reserves Strategy proposed in Section 10. (vii) approves that the final movement in the Housing Revenue Account in 2024/25 is transferred to an earmarked Reserve (HRA) as proposed in Section 10.10. (viii) approves the proposal to set Housing service charges from 7 April 2025 as stated in Section 13. (ix) endorses and approves, where necessary, the revised level of all housing related charges as detailed in Appendix 5. (x) endorses the progress made to date in delivering and maintaining the Scottish Housing Quality Standard (SHQS) for improving and managing the housing stock as set out in Section 7 and the related Business Cases. 3. STRUCTURE OF REPORT 3.1 This report is structured over the following sections: • Section 4: Background/Main Issues • Section 5: Tenant Engagement • Section 6: Housing Revenue Account • Section 7: Capital Investment Programme • Section 8: Increasing Council House Stock • Section 9: Rent Strategy • Section 10: Use of Balances/Reserve Strategy • Section 11: Comparison with other Local Authorities and Registered Social Landlords • Section 12: Proposed Rents for other Services • Section 13: Proposed Housing Services Charges • Section 14: Conclusion • Appendices 4. BACKGROUND/MAIN ISSUES 4.1 The Council owns and manages 8,167 properties. The Housing Revenue Account (HRA) covers all operational expense related to supporting tenancies, building maintenance and capital financing for investment in both existing and new social rented housing. It also helps fund major upgrades and improvements through revenue contributions to capital projects. 4.2 The HRA receives income from rents (houses, garages, and other properties) and interest on balances, which funds all relevant HRA expenditure.
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4.3 The HRA Business Plan and Capital Investment Programme ensure that the Council’s housing stock continues to comply with the Scottish Housing Quality Standard (SHQS). 4.4 The HRA Business Plan is updated annually to reflect the available budget, tenants’ priorities, rent strategies and economic conditions, ensuring it remains affordable and sustainable. The Plan has been updated to reflect the proposals within this report. The HRA budget for 2025/26 (Appendix 1) has been prepared in accordance with Housing Acts, Scottish Government directives, and regulatory requirements. 4.5 Our most recent stock condition survey informed the Local Housing Strategy, approved by the Housing and Social Wellbeing Committee on 15 March 2023 (Report No. 23/82 refers). Further work with ARUP is ongoing to investigate eight of our property archetypes and consider measures to decarbonise these house types. We aim to use this information alongside data from the stock condition survey to inform our retrofit programme and revise our rent setting strategy. 4.6 Other factors influencing the Capital Programme and rent setting proposals include tenants’ incomes and rent affordability, increasing costs of materials and services, the climate change agenda and Housing to 2040. The impact of cost-of-living pressures on our tenants and the HRA has influenced the rent setting proposals. 4.7 Members of the Affordable Housing Working Group received an overview of the HRA rent setting process and potential rent options for 2025/26 on 30 September 2024 and were asked to provide feedback. On 30 October 2024, all elected members were given information on the rent options proposals and plans for tenant engagement, including an opportunity to provide feedback. 5. TENANT ENGAGEMENT Approach 5.1 The Scottish Social Housing Charter sets the standards and outcomes that all social landlords should aim to achieve in their housing activities. Outcomes 14 and 15 are specifically linked to the rent setting process and the financial management of the HRA. These outcomes require social landlords to set rents and service charges in consultation with their tenants and other customers to ensure: • A balance between the level of services provided, the cost of these services, and the affordability for current and prospective tenants and other customers. • Tenants receive clear information on how rent and other money is spent, including details of individual expenditure above thresholds.
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5.2 These outcomes reflect local authorities’ legal duties, under section 25(4) of the Housing (Scotland) Act 2001, to consult tenants affected by the proposed increases and consider their views on affordability and spending decisions. Landlords must also decide whether to publish expenditure information and determine the format and level of detail to include. 5.3 Perth and Kinross Council must engage with tenants about rents, ensuring that decisions on rent levels reflect tenants’ views. The proposals in this report incorporate tenants’ feedback. Committee members must demonstrate that they have fully considered these views when approving the report. 5.4 Our approach to involving tenants in the rent setting process was developed by the Strategic Tenant Engagement in the Annual Rent Setting (STEARS) tenant working group. This approach is regularly reviewed with tenants and follows the recommendations from the Scottish Housing Regulator which include: • Providing tenants with three rent increase options. • Demonstrating affordability levels. • Consulting with current and prospective tenants. Rent Affordability Model 5.5 Our affordability model, developed with staff and tenants, is updated annually to assess the affordability of our rent setting proposals. 5.6 This year’s affordability assessment showed that Perth and Kinross Council’s rents are, on average, 8% (£7 per week) lower than neighbouring local authorities and 23% (£24 per week) lower than local Housing Associations. These figures are based on our proposed rent levels for 2025/26, compared to an assumed average national increase of 2.5% for other local authorities and Housing Associations. 5.7 The affordability model indicated that 87% of our residents could afford our proposed rents based on their income alone, without considering any housing benefit they receive. To support those tenants who are struggling financially or have difficulty meeting their rental obligations, we offer a range of support measures including: • Financial assistance through the Tenancy Sustainment Fund. • Financial support through locality team Think Yes budgets. • A team of Support Officers providing tailored advice and support. • Assistance with accessing devices, data and getting online through our Digital Inclusion Project. • Dedicated Welfare Rights support offering specialist advice and assistance. • Specialist money and debt advice service through Citizens Advice Bureau.
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• Advice and support through our Service Level Agreement with SCARF which provides free and impartial energy efficiency advice to Council tenants. 5.8 We also recognise the significant challenges faced by all services and communities in tackling and mitigating the impact of child poverty. The rent affordability model is also used to inform work within the Child Poverty Action Plan, playing a key role in mitigating and addressing child poverty in the area. Tenant Engagement 5.9 In April 2024, all Council tenants received an initial questionnaire asking for their views and priorities regarding rent setting and how additional rent money should be spent. This survey was also shared with our third sector partners who support or work with our tenants. 5.10 A remarkable 1,281 tenants (16%) responded, marking an impressive increase of 812 responses from last year. This outstanding response rate and the valuable insights provided by our tenants are pivotal in shaping our service delivery, driven by the priorities they have identified, as detailed below:" Priority High Medium Low No response Improving our response to repairs in your home 64% 27% 6% 3% Improving the Quality of your Home 61% 29% 6% 4% Improving your neighbourhood and the place where you live 49% 36% 12% 3% Improving the support, we provide to help in your home, and also to keep your home 45% 36% 14% 15% Improving the options to get you more involved in the decisions we make about the Housing Service 30% 45% 19% 16% 5.11 At the summer conference, tenants were asked additional questions to gain more detailed information on their priorities. 5.12 Our autumn conference was held in-person and online on 23 October 2024, providing tenants with another opportunity to discuss this year’s approach and proposals. A question-and-answer session allowed tenants to ask questions about the proposals. Targeted efforts were also made to engage underrepresented groups, including hosting drop-in sessions at local community groups, attending community events, and collaborating with other services to ensure their active participation. 5.13 An information pack was then sent to all tenants, detailing the three proposed rent increase options and the impact and affordability of each.
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5.14 The options were: • 6.0% rent increase • 6.5% rent increase • 7.5% rent increase 5.15 Tenants received information explaining each option, the services and capital improvements that could be delivered, and the potential impacts on service delivery (both positive and negative). Budget Pressures 5.16 The pandemic and cost-of-living pressures has had, and will continue to have, a profound and wide-reaching impact throughout Scotland. Touching all aspects of society, economy, educational outcomes, and our personal lives. The social housing sector is no exception. 5.17 Nationally, the housing sector has been crucial in supporting vulnerable households, maintaining homeless and sheltered housing services, conducting welfare checks, and performing gas and electrical safety checks as well as emergency repairs. However, the sector faces ongoing issues and risks, including increased demand for social housing, rising levels of homelessness, financial hardship among tenants, rent arrears, and challenges in delivering capital and new build projects. 5.18 Regardless of additional pressures or financial impacts, the HRA still faces cost pressures as a result of fixed costs, such as: • Staff costs – pay increases, including increased National Insurance contributions. • Adjustment to Bad & Doubtful debt provision. • Loan charges - rising interest rates are having a major impact on current and future costs equating to a pressure of £500,000 per year for five years. 5.19 These fixed costs are routinely reviewed as part of the budget setting process and our annual review of the 30-year business plan. Use of Reserves 5.20 We are fully aware of the current financial issues our tenants face due to the significant rise in the cost of living, driven by inflation and high energy costs. Therefore, we have looked at ways to reduce further financial pressure on our tenants. 5.21 On 10 March 2021, Council approved that the final movement on the Housing Revenue Account be transferred to an earmarked Reserve (HRA) (Report No. 21/33 refers). This reserve has enabled the HRA to use non-recurring monies for in-year pressures or to defer recurring pressures without impacting on tenant's rents.
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5.22 Our proposals are to utilise some of the Reserves to defer a number of pressures until 2026/27. This will reduce the amount of funding required from a rent increase, thereby reducing the impact on our tenants. We propose to defer pressures amounting to £155,000. 5.23 However, even with this deferral, due to significant cost pressures faced by the HRA, any proposed rent increase is going to be higher than in previous years. The deferred pressures will then form part of the following year’s budget setting process. 5.24 All options presented to tenants are affordable and do not change our current assumptions within the HRA Business Plan, including any future investment. 5.25 This will enable the Council to continue meeting our obligations to our tenants as a landlord and maintain our high levels of performance as a Housing Service, while ensuring our Service remains sustainable and affordable. Rent Options 5.26 Tenants were asked to consider the following options: Under all three options, tenants will see new and increased investment in: • Increased staffing to meet the requirements of compliance and service & maintenance - £187,000. • Planned Maintenance - £181,000. • increased costs of buying stock for repairs and improvements - £175,000 (due to increased costs and supply shortages for building materials). • Contract price increases - £153,000. • Electrical Inspection Condition Reports (EICR) - £135,000. • Garden Maintenance Contract - £115,000. • Property Condition Resource (to prevent damp, mould and condensation) - £105,000 • A new Gypsy Traveller Project Officer - £62,000. • A new Housing Enabler - £60,000. • Increased utility costs - £50,000. • Internet of Things household Wi-Fi sensors project - £17,000. • HRA Roads & Footpaths - £15,000. • Housing Repairs Out of Hours Service - £5,000. • Continued funding for Digital, Financial & Social Inclusion - £150,000. 5.27 Some pressures within the proposals relate to Scottish Government priorities such as: • Electrical Inspection Condition Reports for each property - £135,000 As a landlord, we are legally required to ensure all tenants’ homes have an Electrical Inspection Condition Report (EICR), confirming they meet required electrical standards. We must test all our 8,111 properties every five years, incurring additional costs to the HRA.
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Option 1 - rent increase of 6.0% • Fixed cost increases as detailed in section 5.18 - £1,280,000. • Increased staffing requirements to meet the requirements of compliance and service & maintenance - £187,000. • Planned Maintenance - £181,000. • Increased cost of materials - £175,000. • Contract price increases - £153,000. • Electrical Inspection Condition Reports (EICR) - £135,000. • Garden Maintenance Contract - £115,000. • Property Condition Resource (to prevent damp, mould and condensation) - £105,000. • Gypsy Traveller Project Officer - £62,000. • Housing Enabler - £60,000. • Increased utility costs - £50,000. • Internet of Things household Wi-Fi sensors project - £17,000. • HRA Roads & Footpaths - £15,000. • Housing Repairs Out of Hours Service - £5,000. • Continued funding for Digital, Financial & Social Inclusion - £150,000. • Buy Back Funding over five years (approximately 40 properties per year) - £20million. Option 2 - rent increase of 6.5% • Fixed cost increases. • Pressures as per Option 1. • Buy back funding over five years (approximately 45 properties per year) - £22.5million. • Increased funding for building new houses over five years (approximately 75 properties) - £15million. Option 3 - rent increase of 7.5% • Fixed cost increases. • Pressures as per option 1. • Buy back funding over five years (approximately 55 properties per year) - £27.5million. • Increased funding for building new houses over five years (approximately 225 properties) - £45million. 5.28 In November 2024, all 8,167 tenants received a survey providing rent setting information and were asked to indicate their preferred option. This survey was also promoted through the tenants’ On the House magazine, online Consultation hub, Twitter, Facebook, and text messages. To increase responses, staff conducted phone surveys and carried out drop-in-sessions at local community venues. 5.29 To further increase reach, we commissioned the Knowledge Partnership hub to contact 1,500 tenants directly over the telephone to complete the survey.
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5.30 Our consultation process ensured genuine opportunities for all tenants to receive detailed information on each option, service delivery and to express their preferred level of rent increase for the forthcoming year. 5.31 A total of 3,055 tenants (37.7%) responded with the outcome as follows: • Option 1 – 64% • Option 2 – 25% • Option 3 – 11% 5.32 Due to our proactive approach and genuine focus on tenant engagement, we received an impressive 3,055 responses this year (37.7%), compared to 2,944 responses (36.7%) last year, marking a notable 4% increase. Recommended Option 5.33 Based on the feedback received from tenants and their clear preference, this report recommends that the committee approves Option 1, which proposes a 6.0% rent increase. The details in the following sections of this report pertain to Option 1, as outlined in section 5.27." 6. HOUSING REVENUE ACCOUNT 6.1 The HRA budget (as shown in Appendix 1) is balanced each financial year to ensure the operating costs are met from the yearly rental income. The budget includes an amount for Prudential Borrowing to cover the revenue cost of the capital investment programme. Since the Standard Delivery Plan (SDP) commenced in 2004, £176 million has been borrowed. This included the first major works necessary to meet the Scottish Housing Quality Standard (SHQS), namely, the installation of new kitchens and bathrooms. 6.2 The additional cost pressures (as shown in Appendix 2) that the HRA must manage over the next five financial years include: • A 3% pay increase for Single Status and Trades staff for 2025/26, based on the assumptions contained in the Medium-Term Financial Plan approved by Council on 4 December 2024 (Report No. 24/350 refers), plus the cost of incremental progression. • Increased costs relating to the agreed 2024/25 pay award. • Changes to employer’s national insurance rates for 2025/26 onwards must be fully funded by the HRA, as no additional funding will be provided by the Scottish Government • An adjustment to the bad and doubtful debt provision to take account of the potential increased risk to the Council from increased rent arrears. • Ensuring we can meet our climate change targets by reducing the carbon footprint of our homes while keeping them affordable to heat. • Our legal requirement to ensure all tenants’ homes have an Electrical Inspection Condition report (EICR). • Increased costs and supply shortages for building materials, which we anticipate into next year.
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6.3 To minimise the impact on future rents and borrowing requirements, a range of efficiency savings will be implemented, including: • Increasing staff slippage to 5% to match general fund - £72,000. • Reducing the bad debt provision to 4% of income due to reduction in rent arrears and high rates of tenancy sustainment - £210,000. • Increasing the garden maintenance charge to recover the full costs of the new contract, raising the annual charge from £124 to £454 - £115,000. • Reducing staff travel budgets - £25,000. 6.4 The full detail of the pressures and savings are detailed in Appendix 2. 7. CAPITAL INVESTMENT PROGRAMME 7.1 Significant progress has been made with the capital improvements programme during 2024/2025. Upgrades and improvements include: • 140 properties received window/external door replacements. • 69 properties had a kitchen replacement. • 114 properties had a bathroom replacement. • 108 properties had their heating system replaced. 7.2 The current Energy Efficiency Standard for Social Housing 2 (EESSH2) is in abeyance, and a new standard, known as the Social Housing Net Zero Standard in Scotland, is being proposed by the Scottish Government. The consultation on this closed in March 2024, and we are awaiting further information. The Scottish Housing Regulator (SHR) may ask us to monitor this in 2025/26, but this is yet to be confirmed. 7.3 Our SHQS pass rate increased significantly from 69.03% in 2022/23 to 76.32% in 2023/24, equating to 6,146 properties meeting the SHQS. This improvement is due to better performance in completing EICR’s and smoke detector installations, along with updated lifecycles for elements such as bathroom disrepairs, rainwater goods disrepairs and flashing disrepairs. 7.4 Significant progress has been made this year in implementing new standards, including the installation of interlinked smoke detector systems and EICRs. For 2023/24, 99.65% of our housing stock has a current EICR, with eleven properties (or 0.12% of the housing stock) not having one. Currently, the service is 100% compliant with EICRs. We continue to take a cross- service approach to provide appropriate support to tenants to ensure access to properties, as this remains the main reason for non-compliance. 7.5 For 2023/24, 99.95% of our housing stock had a compliant smoke detector installation. Currently, only four properties are without a compliant smoke detector installation due to undergoing significant improvement works. The smoke detectors will be installed as part of the work before the properties being relet.
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7.6 Non-compliance is due to some areas reaching the final year of a 5-year cycle and issues with resources, capacity and competing priorities. Improvement measures have been put in place to minimise failures within a cycle period. Any remaining failures will be addressed through planned improvement programmes. 7.7 The planned investment programme of £90.6 million for the 5-year period from April 2025 to March 2030 is summarised in Appendix 3. This investment will bring several community benefits and improvements to our Council stock. The proposed Capital Investment Programme must comply with SHQS over the next 5 years and amounts to £35.3 million, as summarised below: • SHQS future developments - £27.5 million. • Central heating & rewiring - £2.1 million. • Kitchens and bathrooms - £2.0 million. • Multi-storey flats* - £1.8 million. • Rewiring/infrastructure/property refurbishment - £0.8 million. • Structural works - £1.0 million. • Sound insulation - £0.1 million. *Work on the 6 multi storey blocks includes all the types of improvement work listed in 7.6 7.8 A review of the capital programme will be informed by the stock condition survey and our proposals to decarbonise the housing stock. In collaboration with ARUP, a dashboard has been developed to review key elements of the property archetypes modelled by ARUP. This dashboard allows us to review factors such as fuel poverty, areas of deprivation alongside a list of measures and potential costs. The dashboard is in the final stages of review and adjustment. It is hoped that further interrogation will assist in outlining of a retrofit programme for the full housing stock, identifying future investment requirements to meet quality and climate change standards, as well as the current and future needs of our tenants. The review of the capital programme, along with our rent strategy, will be concluded once the retrofit programme is understood. The SHQS future developments budget of £27.5 million will be allocated appropriately. 7.9 Relevant business cases have been produced for the capital programmes, where appropriate. These will be made available online on the Councillors’ CHIP EDMS site. 7.10 The capital programme in Appendix 3 details the proposals for the following non- SHQS elements: • Council house new build programme. • Purchasing houses through the open market – buyback programme. • Major adaptations to properties for people with particular support requirements. • Redevelopment and regeneration of St Catherine’s Square. • Investment in Sheltered Housing complexes. • Adaptations to shops & offices.
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• Mortgage to rent – under certain circumstances, where owner/occupiers have difficulty meeting mortgage payments, the Government can arrange for the Council to buy the property and rent it back to the same individual as a tenant to avoid homelessness. • Replacement of lifts to ensure fire safety regulations in multi-storey accommodation is met. • Information and systems technology to support new ways of working (e.g., PCs, mobile technology, servers etc.). 8. INCREASING COUNCIL HOUSE STOCK 8.1 The Council has been increasing its housing stock in three key ways: • New build programme. • Buyback programme. • Conversion of existing HRA commercial properties. 8.2 By the end of March 2025, it is estimated that 582 Council houses will have been built since 2011, 433 former council houses purchased, and 12 properties converted into flats for social rent. Below is an update on each: Building new houses for social rent 8.3 Between 2011 and 2025, the Council will have built 582 new homes. The ongoing aim of the Council’s new build housing programme is to provide high- quality affordable housing to meet local needs, using grant funding from the Scottish Government. 8.4 The size, type, location, and funding of the new build programme is determined through the Strategic Housing Investment Plan, approved by the Housing and Social Wellbeing Committee on 2 October 2024 (Report No. 24/276 refers). 8.5 The Scottish Government reduced the 2024/25 Resource Planning Assumption (RPA) by £4 million. However, confirmation has been received that funding will be increased back to the previous levels for 2025/26. The Capital Investment Programme assumes the Council house building programme will continue to receive the same level of financial support from the Scottish Government and the Council’s Earmarked Reserve for Affordable Housing. 8.6 The Capital Investment Programme, detailed in Appendix 3, includes the existing and an indicative future new build programme, with the funding assumptions as presented in section 8.5. Work is currently underway to identify future sites for new builds, which will be reported to Committee once confirmed as viable projects.
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Increasing housing stock (buybacks and other opportunities) 8.7 Since 2012, we have successfully supported 753 households in finding more suitable accommodation by expanding our stock through buybacks and other opportunities. By 31 March 2025, we will have purchased 433 houses at an approximate cost of £53 million, including upgrades to SHQS. This initiative has enabled an additional 320 moves through vacancy chains. This year, we have surpassed our initial target of 40 properties, purchasing over 100 properties. We remain flexible in our approach to increasing our stock, especially during times of high demand and limited supply." 8.8 The capital investment programme has £20 million of funding allocated for buybacks over the next five years, with the potential to allocate additional funds from the overall budget for increasing Council stock. This funding will be accelerated as properties become available for purchase. 8.9 The Council has obtained additional funding of £12.4 million from the Scottish Government’s Housing Allocation Grant for the period 2013/14 to 2024/25. This has allowed the purchase of approximately 100 properties beyond the existing budget within the Capital Investment Programme. 9. RENT STRATEGY 9.1 When setting the 2024/25 budget, the Housing and Social Wellbeing Committee approved a 6% rent increase for 2024/25 and an indicative rate of 4.5% for 2025/26, with an anticipated minimum of 2.2% for the following 3 years (Report No. 24/24 refers). 9.2 This provided a baseline level for tenants and highlighted the potential future rent increases required to deliver the capital investment programme and running costs of the HRA. 9.3 To meet tenant’s priorities gathered through the extensive consultation, Scottish Government requirements, climate change legislation, EICRs, and fixed HRA costs, a 6.0% rent increase (option 1) will be required for 2025/26. This proposed increase reflects tenant views (section 5.30) while maintaining the financial health of the HRA Business Plan. 9.4 The proposed rent strategy for 2026/27 to 2029/30 will be set at an indicative rate of 3.5% for 2026/27, then an anticipated minimum of 2.2% for the following three years. The actual level will depend on tenant feedback and the wider HRA rent setting process. 9.5 This strategy, agreed with tenants, aims to provide a guide on potential future rental increases. However, the actual increase will be based on future pressures and tenant consultation on spending priorities, which change annually. The rent strategy will be reviewed in consultation with tenants based on retrofit assessment findings, which will inform the level of capital investment required to meet future energy efficiency standards.
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9.6 The current rent strategy allows the HRA to: • Set rents at reasonable levels, maintaining Perth and Kinross Council rents lower than the Scottish average. • Demonstrate affordable rents for our tenants. • Finance future investment programmes to improve housing stock. • Provide headroom for a commitment of 80 new houses each year. • Increase Council house stock by purchasing houses through the open market. • Finance the revenue borrowing cost of previous capital programme investment to meet the SHQS and provide a new build programme (582 houses to date). • Continue to resource Locality Teams in managing tenancies, foster tenant participation, and working with community partners to create safe and vibrant neighbourhoods. • Enable a Reserves Strategy to provide uncommitted reserves of £1million. 10. USE OF BALANCES/RESERVES STRATEGY 10.1 When reviewing their medium-term financial plans and preparing annual budgets, local authorities should consider establishing and maintaining reserves for three main purposes: • Provide working balances to cushion the impact of uneven cash flows and avoid unnecessary borrowing. • Cushion the impact of unexpected events or emergencies. • Build up funds, often referred to as earmarked reserves, to meet known or predicted requirements. 10.2 Money held in the general reserve is not directly used to deliver the Housing Business Plan but is set aside for the purposes outlined in section 10.1. 10.3 The financial risks to which the HRA could potentially be exposed include: • Additional repairs due to severe weather events and other emergencies, such as a significant fire or flooding. • The current economic climate. • Increasing rent arrears. • New legislation such as climate change and other statutory guidance. • Economic conditions that could impact commercial lets, resulting in lower rent levels or properties remaining void for longer periods. 10.4 In view of the potential risks and in accordance with guidance from the CIPFA Local Authority Advisory Panel Bulletin (LAAP) 99 (published in July 2014), the Chief Financial Officer recommends retaining an uncommitted reserve on the Housing Revenue Account of between 2% and 4% of gross expenditure, approximately £766,000 to £1,532,000. This will be reviewed in future years and amended as required.
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10.5 At the Housing and Social Wellbeing Committee of 24 January 2024, members agreed that the HRA should maintain an uncommitted general reserve balance of £1,000,000 (Report No. 24/24 refers). After reviewing the 30-year business plan, it is considered prudent to maintain this balance for the next five years. 10.6 It is not anticipated that there will be any requirement to utilise the reserve in 2024/25, so the balance will remain at £1,000,000. 10.7 At the same meeting, members agreed that the final movement on the Housing Revenue Account be transferred into the ear-marked Reserves (HRA) (Report No. 24/24 refers). 10.8 On 20 November 2024, the Council was advised of a projected underspend of £119,000 on the Housing Revenue Account which would see an increase in the contribution to Capital from Current Revenue (CFCR) budget with a corresponding reduction in borrowing (Report No. 24/318 refers). 10.9 The latest monitoring position, to be presented to Council in February will show a positive movement of approximately £23,000. 10.10 Committee is asked to approve that the final movement on the Housing Revenue Account between the position reported to Finance and Resources Committee on 5 February 2025 and the final position is transferred to the earmarked Reserve (HRA). 11. COMPARISON WITH OTHER LOCAL AUTHORITIES AND REGISTERED SOCIAL LANDLORDS 11.1 Appendix 4 shows the Council house rents in Perth and Kinross compared to other councils in Scotland. Perth and Kinross Council currently has the 4th lowest rent in Scotland, at £7.63 below the Scottish average. 11.2 This year, the comparison has been based on all other local authorities increasing their rents by the same percentage as they did last year. 11.3 Using these assumptions, Perth and Kinross would have an average rent of £84.52 compared to the projected Scottish average of £92.39 for 2025/26. This would mean Perth and Kinross Council would have the 4th lowest rent in Scotland, £7.87 lower than the projected Scottish average. 11.4 The level of rent increases for 2024/25 across local authorities in Scotland ranged from 3.5% to 7.95%, with the Scottish average being 5.75%. 11.5 Table 1 below details 2023/24 average rent levels for the main Registered Social Landlords (RSLs) within Perth and Kinross.
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Registered Social Landlord 2023/24 Bedroom Size/Weekly Rent (£) Bedsit 1 2 3 4+ PKC 53.28 74.15 80.34 88.91 96.85 Caledonia 123.28 106.90 94.63 101.61 111.75 Hillcrest HA 61.35 84.96 99.42 111.01 112.80 Kingdom HA 71.88 84.11 93.33 104.28 110.11 Table 1: Average Rents 2023/24 (based on 52 weeks) Source: Scottish Housing Regulator 2023/24 Landlord Reports 11.6 Last year, we participated in a benchmarking exercise to compare the financial health of HRA Business Plans across local authorities in Scotland. This exercise showed that our business plan is well managed and in a good position to meet current and future demands and service requirements. 12. PROPOSED RENTS FOR OTHER SERVICES 12.1 It is recommended that a range of non-commercial rents, excluding the HRA rents for housing stock (detailed in section 9), be amended as detailed below from 7 April 2025. These proposals ensure the Council continues to set rents that reflect the characteristics of individual dwellings and services provided. The different types of properties are detailed separately below: Rental charges for Greyfriars House 12.2 A 6.0% rent increase for Greyfriars House to reflect the same rental strategy for mainstream rents. Rental charges for dispersed temporary accommodation 12.3 A 6.0% increase on rental charges for properties owned by the HRA but allocated as temporary accommodation for homeless people, reflecting the rental strategy for mainstream rents. Lock-ups 12.4 A 6.0% rent increase for lock-ups to reflect the rental strategy for house rents and continued investment in repairs and maintenance. Garage Sites 12.5 A 6.0% rent increase for garage sites to reflect the rental strategy for house rents and continued investment in repairs and maintenance. Commercial rents 12.6 Rents from commercial properties are negotiated by Estates colleagues on a property-by-property basis. These contracts include agreed levels of fees and are not within the scope of this report.
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13. PROPOSED HOUSING SERVICE CHARGES 13.1 Local Authority Housing Services separate service charges from housing rents, to ensure that charges for services, such as caretaking, are fair and transparent. Service charges usually reflect additional services that may not be provided to every tenant, or which may relate to communal facilities rather than directly to the occupation of a dwelling. Additionally, the HRA charges owners for services provided as determined by title deeds, the Tenement Management Scheme, and the Property Factors Agreement. 13.2 The range of service charges currently levied by the HRA to tenants and owner occupiers are shown in tables 2 and 3 below. All services, apart from the garden maintenance scheme and communal heating at particular locations, are included in tenants’ rents. Owner occupiers in mixed tenure locations have additional charges as they have to meet some costs for the services they receive as determined by their title deeds. 13.3 At the Housing and Health Committee of 27 January 2016, members agreed that the charge to Council tenants and private owners at Market, Milne and Lickley Court for communal energy costs will be adjusted each year to reflect the previous year’s energy costs (Report No. 16/28 refers). 13.4 The communal energy costs at Sheltered Housing Complexes are also reviewed in line with the current agreement for Market, Milne & Lickley. 13.5 This year has seen a decrease in all the properties compared to the previous year. 13.6 Our costs of running the Garden Maintenance Scheme have increased significantly. As this service is not part of the landlord function, the costs of this service require to be borne by the tenants using the service and not the wider tenants of the HRA. All current tenants receiving this service have been advised of the proposed increase in charges, along with information on the support available to them.
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13.7 The revised service charges to tenants for garden maintenance and communal energy costs are outlined below: Service Charges to Tenants 2024/25 Current Annual Charge 2025/26 Proposed Annual Charge 2025/26 Proposed Increases/ (Reductions) Garden Maintenance Scheme £123.76 £453.96 £330.20 Garden Maintenance – Hedge Cutting £0 £46.80 £46.80 Retirement Complexes £253.24 £261.04 £7.80 Communal Energy Costs – (Market, Milne and Lickley) £791.44 £632.84 (£158.60) Heating and Lighting at Sheltered Housing complexes £791.96 - £1,334.84 £633.88 - £1,117.48 (£75.40) – (£217.35) Table 2: Service Charges to Tenants 13.8 Since the Property Factors Agreement was implemented on 1 April 2014, Housing & Health Committee approved a range of charges for owner occupiers of multi-tenure blocks (Report No. 14/114 refers). These charges are reviewed annually to reflect the actual cost of the service provided. The proposed charges for 2025/26 are detailed in Table 3 below: Service Charges to Owner Occupiers 2024/25 Current Annual Charge 2025/26 Proposed Annual Charge 2025/26 Proposed Increases/ (Decreases) Stair Lighting £29.12 £52.35 £23.23 Market Court £1,339.07 £1,302.95 (£36.12) Milne Court £1,339.15 £1,302.95 (£36.20) Lickley Court £1,339.27 £1,303.08 (£36.19) Potterhill £444.77 £526.63 £81.86 Pomarium (Nos 7-51) £491.47 £650.04 £158.57 Pomarium (Nos 52-95) £492.07 £650.57 £158.50 Table 3: Service Charges to Owner Occupiers
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Rechargeable Repairs 13.9 The HRA has a policy to recover the costs of repairs, clearance, and related works from current or former tenants and owners/residents. Accounts are raised for a number of reasons, including to: • Recovering the cost of work arising from tenant misuse. • Consistently enforcing the conditions of the Scottish Secure Tenancy. • Deterring misuse and negligence of Council property. 13.10 A summary of all housing charges for 2025/26 is detailed at Appendix 5. 14. CONCLUSION 14.1 This report details the proposed HRA budget for the 5-year period from 2025/26 - 2029/30 and recommends rent increases for houses and other HRA properties. 14.2 The recommended 6.0% increase, detailed in option 1, reflects the views of our tenants. This will ensure that our rent levels remain affordable and are projected to be 4th lowest in Scotland, continuing to compare favourably at a national level. 14.3 The measures outlined will support continued and sustained improvements in the delivery of housing services. Specifically, they will: • Provide investment in our repairs and maintenance budgets to meet current demand and ensure performance standards are met. • Ensure our properties have an up-to-date Electrical Inspection Condition Reports (EICRs) to meet legal obligations. • Enable us to work towards our climate change targets by reducing the carbon footprint of our homes while keeping them affordable to heat. • Increase our housing stock and support the delivery of our new build commitments to meet housing need in the area. • Continue to invest in homes through the capital investment programme, ensuring ongoing compliance with the SHQS. 14.4 The cumulative effect of these measures will support the delivery of the Charter outcomes to meet housing needs in the area, provide safe and secure housing, and support sustainable tenancies and communities throughout the area.
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Author Name Designation Contact Details Steven Coyle Finance & Governance Team Leader EPLCommitteereports@pkc.gov.uk 01738 475000 Approved Name Designation Date Elaine Ritchie Strategic Lead Housing and Communities 8 January 2025 Scott Walker Strategic Lead – Finance and Business Support 20 December 2024 APPENDICES • Appendix 1 – HRA Provisional Revenue Budget 2025-2030 • Appendix 2 – HRA Executive Summaries 2025-2030 • Appendix 3 – HRA Capital Investment Programme 2025-2030 • Appendix 4 – Estimated Projected Average Rents • Appendix 5 – Housing Related Charges 2025-26
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ANNEX 1. IMPLICATIONS, ASSESSMENTS, CONSULTATION AND COMMUNICATION Strategic Implications Yes / None Community Plan / Single Outcome Agreement None Corporate Plan Yes Resource Implications Financial Yes Workforce None Asset Management (land, property, IST) None Assessments Equality Impact Assessment Yes Strategic Environmental Assessment Yes Sustainability (community, economic, environmental) Yes Legal and Governance None Risk None Consultation Internal Yes External Yes Communication Communications Plan None 1. Strategic Implications Community Plan / Single Outcome Agreement 1.1 This report supports the following priorities within the Perth and Kinross Community Plan 2022-27: (i) Reducing Poverty (ii) Physical and mental wellbeing (iii) Digital participation (iv) Learning and development (v) Employability Corporate Plan 1.2 The activities detailed in the report supports the achievement of the Council’s Corporate Plan Priorities: (i) Tackling poverty (ii) Tackling climate change and supporting sustainable places (iii) Developing a resilient, stronger and greener local economy (iv) Enabling our children and young people to achieve their full potential (v) Protecting and caring for our most vulnerable people (vi) Supporting and promoting physical and mental wellbeing (vii) Working in partnership with communities
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2. Resource Implications Financial 2.1 There are no direct financial implications arising from this report other than those reported within the body of the main report. 3. Assessments Equality Impact Assessment 3.1 Under the Equality Act 2010, the Council is required to eliminate discrimination, advance equality of opportunity, and foster good relations between equality groups. Carrying out Equality Impact Assessments for plans and policies allows the Council to demonstrate that it is meeting these duties. 3.2 The information contained within this report has been considered under the Corporate Equalities Impact Assessment process (EqIA) and no major change required, the Budget Option is robust and can continue without amendment. Strategic Environmental Assessment 3.3 The Environmental Assessment (Scotland) Act 2005 places a duty on the Council to identify and assess the environmental consequences of its proposals. 3.4 However, no action is required as the Act does not apply to the matters presented in this report. This is because the Committee are requested to note the contents of the report only and the Committee are not being requested to approve, adopt, or agree to an action or to set the framework for future decisions. Sustainability 3.5 Under the provisions of the Local Government in Scotland Act 2003 the Council has to discharge its duties in a way which contributes to the achievement of sustainable development. Under the Climate Change (Scotland) Act 2009 the Council also has a duty relating to climate change and, in exercising its functions must act: - • in the way best calculated to delivery of the Act’s emissions reduction targets • in the way best calculated to deliver any statutory adaptation programmes • in a way that it considers most sustainable. 3.6 The information contained within this report has been considered under the Act. However, no action is required as the Act does not apply to the matters presented in this report.
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Legal and Governance 3.7 The Strategic Lead, Legal and Governance was consulted on this report. Risk 3.8 None arising from this report. 4. Consultation Internal 4.1 The Strategic Leadership Team have been consulted in the preparation of this report. External 4.2 All tenants received communication on the proposals via “On the House” magazine, Twitter, Facebook, and text messages. Staff across the service also undertook phone surveys and face to face visits. 4.3 The Tenant Committee Report Panel was consulted on this report. They commented that “The Tenant Committee Report Panel was consulted on this report and a meeting was held to allow tenants to question Lead Officers. Overall, the Panel felt that this was a good report detailing potential financial impacts on tenants.” 5. Communication 5.1 None. 2. BACKGROUND PAPERS 2.1 None.