Housing Revenue Accounts (HRA) Strategic Financial Plan Incorporating the 5 Year Capital Investment Programme and Rent Strategy to 2028/29; Reserves Strategy and Other Housing Charges for 2024/25
Perth and Kinross Council · 24 January 2024
Back to Housing and Social Wellbeing Committee — 24 January 2024 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
Perth And Kinross Council Housing and Social Wellbeing Committee 24 January 2024 HOUSING REVENUE ACCOUNT (HRA) STRATEGIC FINANCIAL PLAN INCORPORATING THE 5 YEAR CAPITAL INVESTMENT PROGRAMME AND RENT STRATEGY TO 2028/29, RESERVES STRATEGY AND OTHER HOUSING CHARGES FOR 2024/25 Joint Report by Executive Director (Communities) and Strategic Lead – Finance and Business Support (Report No. 24/24) 1. PURPOSE 1.1 The report seeks approval of the proposed Housing Revenue Account (HRA) budget for five years from 2024/25 to 2028/29. 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 £97.5 million from 2024/25 to 2028/29. 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 2024/25 and provisional budgets for financial years 2025/26 to 2028/29 as set out in Appendix 1. (ii) approves the proposed Housing Revenue Account Capital Investment Programme for 2024/25 to 2028/29 as set out in Appendix 4. (iii) approves the Rent Strategy for 2024/25 and a provisional Rent Strategy for the following 4 years to 2028/29 as stated in Section 9. (iv) approves the rent increase of 6.0% in line with option 1, for the year commencing 1 April 2024 for all Council houses. This would mean an average weekly rent increase of £4.51 per week, giving an average weekly rent of £79.74 per week based on 52 weeks. (v) approves the rent increase of 6.0% for the year commencing 1 April 2024 for: • all lock-ups • all garage sites • dispersed tenancies owned by the HRA • Greyfriars Hostel.
Page 2
(vi) approves the Housing Revenue Account Reserves Strategy proposed in Section 10. (vii) approves that the final movement in the Housing Revenue Account in 2023/24 is transferred to a Covid-19 earmarked Reserve (HRA) as proposed in Section 10.10. (viii) approves the proposal to set Housing service charges from 1 April 2024 as stated in Section 13. (ix) endorses and approves, where necessary, the revised level of all housing related charges as detailed in Appendix 6. (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 8,021 properties. The Housing Revenue Account (HRA) meets all operational expenditure of supporting tenancies, building maintenance and capital financing charges associated with investment in existing and new social rented housing stock. It also contributes to financing major upgrades and improvements in the investment programme, 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. 4.3 The HRA Business Plan and Capital Investment Programme form the basis of proposals to ensure that the Council’s housing stock continues to comply with the Scottish Housing Quality Standard (SHQS).
Page 3
4.4 The HRA Business Plan is updated each year to reflect the available budget, tenants’ priorities, rent strategies and economic conditions to ensure it continues to be affordable and sustainable. The HRA Business Plan has been updated to reflect the proposals within this report. The HRA budget for 2024/25 (Appendix 1) has been prepared in accordance with Housing Acts, Scottish Government directives and regulatory requirements. 4.5 A stock condition survey was commissioned in January 2020 but was delayed due to COVID-19. The survey has been completed and confirms that our overall housing conditions are good with no major outstanding repair works required. The report was used to inform the Local Housing Strategy, which was approved by the Housing and Social Wellbeing Committee on 15 March 2023 (Report No. 23/82 refers). The data from the report will be used alongside information from our work with consultants ARUP on how we can decarbonise our housing stock. Both will inform plans to ensure all our existing stock meets climate change legislation. 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 impacts of the COVID-19 pandemic and the cost-of-living crisis on our tenants and the HRA remain key factors that have influenced the rent setting proposals. 4.7 An Affordable Housing Working Group briefing session on the overview of the HRA rent setting process and potential rent options for 2024/25 was held on 27 September 2023. Following the working group, all elected members were provided with the rent options proposals that were issued to tenants. An elected member briefing session was held on 11 December 2023; this gave all members the opportunity to ask questions on the process and proposals that tenants were voting on. All members were provided with further information on the questions raised at the session. 5. TENANT ENGAGEMENT Approach 5.1 The Scottish Social Housing Charter sets the standards and outcomes that all social landlords should aim to achieve when performing their housing activities. Outcomes 14 and 15 are the outcomes primarily linked to the rent setting process and the financial aspect/delivery of the HRA. These outcomes require social landlords to set rents and service charges in consultation with their tenants and other customers so that: • a balance is struck between the level of services provided, the cost of the services and how far current and prospective tenants and other customers can afford them. • tenants get clear information on how rent and other money is spent, including any details of individual items of expenditure above thresholds agreed between landlords and tenants.
Page 4
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 to have regard to their views, including affordability and decisions about how rental income is spent. Landlords must also decide whether to publish information on expenditure, as well as the format and level of detail to be included within this information. 5.3 Perth and Kinross Council must engage in discussions with tenants about rents and any decisions made, in relation to rent levels, should reflect tenants’ views. The proposals contained within this report reflect tenants’ views. In approving this report, members of the committee must demonstrate that they have fully considered these views. 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 3 rent increase options • demonstrating affordability levels • consulting with current and prospective tenants. Rent Affordability Model 5.5 Our affordability model was developed with staff and tenants and is updated annually to assess the affordability of our rent setting proposals. 5.6 The outcome from this year’s affordability assessment demonstrated that Perth and Kinross Council’s rents were, on average, 10% (£8 per week) lower than neighbouring local authorities and 26% (£20 per week) lower than local Housing Associations. These figures are based on our proposed rent levels for 2024/25, compared against an assumed average national increase of 2.5% for other local authorities and Housing Associations. 5.7 The affordability model demonstrated that 86% of our residents could afford our proposed rents based on their income alone, without taking into account any housing benefit they receive. To support those tenants who are struggling financially or have difficulty meeting their rental obligations, a range of support measures are in place including: - • financial assistance through the Tenancy Sustainment Fund • financial support through locality team Think Yes budgets • a team of Support Officers that can provide tailored advice and support • assistance with accessing devices, data and getting online through our digital Inclusion Project • dedicated Welfare Rights support to offer specialist advice and assistance • specialist money and debt advice service through Citizens Advice Bureau • advice and support through our bespoke service from our Service Level Agreement with SCARF who provide free and impartial energy efficiency advice to Council tenants.
Page 5
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. It plays a key contribution in mitigating and addressing child poverty in the area. Rent Freeze Announcement 5.9 The Scottish Government published the Programme for Government 2022 to 2023 on 6 September 2022. An element of this included an announcement regarding an immediate rent freeze impacting on all private and social landlords: “As part of this we intend to introduce emergency legislation to protect tenants by freezing rents and imposing a moratorium on evictions until at least 31 March 2023. We also intend to act to prevent immediate rent increases.” 5.10 The Act ended on 31 March 2023, therefore removing the rent freeze on the social rented sector rent cap on that date. Statements of Intent have been published by COSLA, confirming local authorities’ commitment to keeping rent increases from April 2023 to an average of no more than £5 per week. The agreement to set out average figures, rather than set a fixed cap, allows flexibility for landlords to respond to their consultation with their tenants. It is anticipated that this will continue from April 2024. Tenant Engagement 5.11 In April 2023, all Council tenants received a questionnaire asking for their views and priorities in relation to rent setting, and how additional rent money should be spent. This information was also extended to our third sector partners supporting or working with our tenants. 5.12 A total of 469 (6%) of tenants responded, a reduction of 136 responses from last year, highlighting their priorities as follows: Priority High Medium Low No response Improving our response to repairs in your home 64% 24% 4% 8% Improving the Quality of your Home 54% 29% 8% 9% Improving your neighbourhood and the place where you live 42% 37% 12% 9% Improving the support, we provide to help in your home, and also to keep your home 40% 36% 14% 10% Improving the options to get you more involved in the decisions we make about the Housing Service 24% 40% 24% 12%
Page 6
5.13 At the locality summer roadshows, tenants were asked additional questions to gain more detailed information on these priorities. The questions and results are detailed at Appendix 2. 5.14 Our autumn roadshows were also held in-person and online on 23 October 2023, which gave tenants a further opportunity to discuss this year’s approach and proposals. A question-and-answer session was held at the forum, providing tenants with the opportunity to ask questions on the proposals presented to them. 5.15 An information pack was then sent to all tenants providing details of the 3 proposed rent increase options and the impact and affordability of each of these. 5.16 The options were: • 6.0% rent increase • 6.25% rent increase • 6.5% rent increase 5.17 Tenants were provided with information and an explanation of each option, the services and capital improvements that could be delivered, and the potential impacts on service delivery (both positive and negative) of each. Covid Impacts and associated Budget Pressures 5.18 The COVID-19 pandemic 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 to this. 5.19 At a national level, the housing sector has played a critical role in supporting many vulnerable households, maintaining the delivery of homeless and sheltered housing services, undertaking welfare checks and continuing to undertake gas safety checks and emergency repairs. Issues and risks for the sector have emerged, and will continue to do so, around homelessness, financial hardship and rent arrears, access to housing and the ability of the sector to re-mobilise its capital and new build projects. 5.20 Irrespective of any additional new pressures or financial impacts of Covid, the HRA still has cost pressures as a result of fixed costs. Examples of these cost pressures are: - • staff costs • 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 5 years 5.21 These fixed costs are routinely reviewed as part of the budget setting process and our annual review of the 30-year business plan.
Page 7
Use of Reserves 5.22 We are fully aware of the current financial issues our tenants are facing as a result of the significant rise in the cost of living, due to inflationary and high energy costs. Therefore, we have looked at ways we can reduce any further financial pressure on our tenants. 5.23 On 10 March 2021, Council approved that the final movement on the Housing Revenue Account is transferred to an earmarked Covid-19 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. 5.24 Our proposals are to utilise some of the Covid reserves to defer a number of pressures until 2025/26. This will reduce the amount of funding required from a rent increase, therefore reducing the impact on our tenants. We are proposing to defer pressures amounting to £461,000. 5.25 However, even when this is factored in, due to the significant cost pressures faced by the HRA, any proposed rent increase is going to be higher than in previous years. The deferred pressures would then form part of the following year’s budget setting process. 5.26 All options that have been presented to tenants are affordable and do not change our current assumptions within the HRA Business Plan, including any future investment. 5.27 This will enable the Council to continue to meet our obligations to our tenants as a landlord and maintain our current high levels of performance as a Housing Service, whilst ensuring our Service remains sustainable and affordable. Rent Options 5.28 The options that tenants were asked to consider are as follows: - Under all three options tenants will see new and increased investment in: • increased staffing requirements to meet the requirements of compliance and service & maintenance - £332,000 • increased costs of buying stock for repairs and improvements - £229,000 – we have experienced increased costs and supply shortages for building materials during the current year and anticipate that these will continue to increase over the next few years • service and maintenance - costs to operate and maintain emergency lighting to communal areas across our stock - £204,000 • contract price increases - £157,000 • additional Trades Staff to support the introduction of an evening and weekend appointment system for our Repairs Service - £90,000 • increased energy costs - £85,000 • increased corporate recharges to Housing Service - £85,000.
Page 8
• investing in our Internet of Things project which provides tenants with free household wi-fi sensors - £56,000 • increased Estate Based Initiative funding - £50,000 • additional Anti-Social Behaviour Measures - £39,000 • maintaining our housing stock database - £6,000 • fire Sprinkler Systems - £2,000 • continued funding for Digital, Financial & Social Inclusion Projects with partners Lead Scotland and Citizens Advice Bureau 5.29 Some of our pressures within the proposals are in relation to Scottish Government priorities such as: • Electrical Inspection Condition Reports for each property - £100,000 As a landlord, we have a legal requirement to ensure that all tenants homes have an Electrical Inspection Condition Report (EICR). This report confirms that their home fully meets the required electrical standards. We must test all our 8,021 properties every 5 years which means this programme of work will involve additional costs to the HRA. Option 1 - rent increase of 6.0% • fixed cost increases as detailed in section 5.20 - £1,169,000 • increased staffing requirements to meet the requirements of compliance and service & maintenance - £332,000 • increased cost of materials - £229,000 • contract price increases - £157,000 • electrical Inspection Condition Reports (EICR) - £100,000 • additional Trades Staff to support the introduction of an evening and weekend appointment system for our Repairs Service - £90,000 • increased energy costs - £85,000 • increased corporate recharges to Housing Service - £85,000. • investing in our Internet of Things project which provides tenants with free household wi-fi sensors - £56,000 • increased Estate Based Initiative funding - £50,000 • additional Anti-Social Behaviour Measures - £39,000 • maintaining our housing stick database - £6,000 • fire sprinkler systems - £2,000 • continued funding for Digital, Financial & Social Inclusion Projects with partners Lead Scotland and Citizens Advice Bureau • buy back funding of £20million over 5 years to purchase approximately 40 ex-Council properties per year to boost our housing stock Option 2 - rent increase of 6.25% • fixed cost increases • the pressures we face as per Option 1 • buy back funding of £22.5million over 5 years to purchase approximately 45 ex-Council properties per year to boost our housing stock • additional money for:
Page 9
o additional Trades Staff to support the introduction of an evening and weekend appointment system for our Repairs Service - £45,000 o increased funding for Internet of Things environmental sensor project to increase the number of tenants participating - £28,000 Option 3 - rent increase of 6.5% • fixed cost increases • the pressures we face as per option 1 • buy back funding of £25million over 5 years to purchase approximately 50 ex-Council properties per year to boost our housing stock • additional pressures included for: o more Trades Staff to support the introduction of an evening and weekend appointment system for our Repairs Service - £90,000 o increased funding for Internet of Things environmental sensors project, to increase the number of tenants participating - £56,000 5.30 In November 2023, all 8,021 tenants received a survey providing rent setting information and were asked to indicate their preferred option. This information and survey were also promoted through the tenants’ On the House magazine, online Consultation hub, Twitter, Facebook, and text messages. To increase the level of responses and encourage as many tenants as possible to have their say, staff across the service also undertook phone surveys and carried out drop-in- sessions at local venues. 5.31 To increase our reach to tenants further, we commissioned the Knowledge Partnership hub to contact 1,500 tenants directly over the telephone to complete the survey. 5.32 From the above methods, our consultation process has ensured genuine opportunities for all tenants to receive detailed information on each option, on service delivery and to express their preferred level of rent increase for the forthcoming year. A total 2,944 of tenants (36.7%) responded with the outcome as follows: • Option 1 – 58.6% • Option 2 – 21.8% • Option 3 – 19.6% The total number of responses this year was 2,944 (36.7%), this compares to 2,625 (33%) last year, representing an increase of 12%. Recommended Option 5.33 Based on tenant feedback and a clear preference by tenants, this report recommends that committee approves option 1 to increase rents by 6.0%. The detail contained within the following sections of this report relate to option 1 as detailed in section 5.29.
Page 10
6. HOUSING REVENUE ACCOUNT 6.1 A budget for the HRA (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 meet the revenue cost of the capital investment programme. Since the Standard Delivery Plan (SDP) commenced in 2004, £159 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 3) which the HRA must contain within the next 5 financial years relate to the main areas described below: • the budget allows for a 3% pay increase for Single Status and Trades staff for 2024/25, based on the assumptions contained in the Medium-Term Financial Plan approved by Council on 4 October 2023 (Report No. 23/267 refers), plus the cost of incremental progression. • the increased costs relating to the agreed 2023/24 pay award. • an adjustment to the bad and doubtful debt provision to take account of the potential increased risk to the Council as a result of increased rent arrears • ensuring that we can meet our climate change targets by reducing the carbon footprint of our homes, whilst making sure they remain affordable to heat. • our legal requirement to ensure that all our tenants’ homes have an Electrical Inspection Condition report (EICR). • increased costs and supply shortages for building materials. We anticipate that current shortages and price increases will continue into next year. 6.3 The full detail of the pressures and savings are detailed in Appendix 3. 7. CAPITAL INVESTMENT PROGRAMME 7.1 Good progress has again been made with the capital improvements programme during 2022/2023. Upgrade and improvements work was carried out as follows: • 55 properties received window/external door replacements • 36 properties had a kitchen replacement • 159 properties had a bathroom replacement • 46 properties received additional insulation measures • 171 properties had their central heating system replaced. 7.2 From 2021, a revised definition of the SHQS was introduced to reflect the new Energy Efficiency Standard for Social Housing (EESSH). This is a much higher standard to achieve than previously. This change relates to increasing the energy efficiency of the property. However, changes to the SHQS also include the introduction of new indicators, such as the installation of carbon monoxide/interlinked smoke detector systems, and the completion of a 5-year Electrical Inspection Certificate Report for each property.
Page 11
7.3 Our SHQS pass rate increased significantly from 46.38% in 2021/22 to 69.03% in 2022/23. In terms of number of dwellings, this equates to 5,495 properties meeting the SHQS. The pass rate has increased as a result of improved performance relating to the implementation of the improvements required to meet the new standards. The work required for the implementation of these standards had previously been delayed during the Covid period and significant delays had been encountered with obtaining materials, procurement and shortages with labour, particularly with electricians. 7.4 There has been significant progress made this year in the implementation of the new standards with the installation of interlinked smoke detector systems and EICRs. For 2022/23, the EICR performance records indicate that 99.3% of our housing stock has a current EICR. As of 31 March 2023, a total of 55 properties (or 0.7% of the housing stock) did not have a current EICR. We are working hard to get all 55 properties completed by early 2024, but we are experiencing significant delays with the pending cases due to issues with utility providers and tenants not providing access. For 2022/23, 99.89% of our housing stock had a compliant smoke detector installation. There has been work ongoing in this year to reduce the number of properties that were non-compliant in this area and we currently only have 3 properties without a compliant smoke detector installation; this is due to the properties undergoing significant improvement works, and the smoke detectors will be installed as part of the work prior to the properties being relet. 7.5 The remaining areas of non-compliance relate to a peak in the number of elements that have reached the point of being recorded as failures. This is due to some areas reaching the final year of a 5-year cycle and issues with resources, capacity and competing priorities resulting in some failures not being addressed before the end of the cycle. However, to minimise the number of areas reaching a failure within a cycle period, we have put improvement measures in place to provide review and check-in periods to undertake an assessment regarding the element, within a certain timeframe, to limit the number of failures, where possible. Any elements that remain as failures will be cross-referenced with the planned improvements programmes to ensure that they are replaced or refurbished. The Service will continue to demonstrate its excellent track record in delivering improvements to meet the standards. 7.6 The planned investment programme of £97.5 million for the 5-year period from April 2024 to March 2029 is summarised in Appendix 4. Several community benefits will arise from this level of investment, as well as the improvements to our Council stock. The proposed Capital Investment Programme must comply with SHQS over the next 5 years and amounts to £38.1 million, as summarised below: • SHQS future developments - £26.1 million • kitchens and bathrooms - £3.5 million • central heating & rewiring - £3.4 million • multi-storey flats* - £1.8 million • rewiring/infrastructure/property refurbishment - £1.7 million
Page 12
• structural works - £0.8 million • energy efficiency works - £0.4 million • external fabric works - £0.3 million • sound insulation - £0.1 million *Work on the 6 multi storey blocks includes all the types of improvement work listed in 7.6 7.7 A review of the capital programme will be informed by the stock condition survey and our proposals to decarbonise the housing stock. In the work with ARUP, it is proposed that a toolkit will be created that will inform the development of a retrofit programme of work. This toolkit will focus on key elements of the property archetypes and wider factors such as fuel poverty and areas of deprivation. It is anticipated that will be piloted from June 2024 and from this, we will be able to form a retrofit programme for the full housing stock. This will identify future investment requirements, to ensure our stock meets required quality and climate change standards, as well as the current and future needs of our tenants. The review of the capital programme will be concluded once there is an understanding of the retrofit programme. The SHQS future developments budget of £26.1 million will be allocated appropriately. 7.8 Relevant business cases have been produced for the capital programmes, where appropriate. These will be made available online on the Councillors’ CHIP EDMS site. 7.9 The capital programme in Appendix 4 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 • mortgage to rent – under certain circumstances, where owner/occupiers have difficulty in 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 will be required to support new ways of working e.g., PCs, mobile technology, servers etc. 8. INCREASING COUNCIL HOUSE STOCK 8.1 The Council has been continuing to increase its housing stock in three key ways: • new build programme • buyback scheme • conversion of existing HRA commercial properties.
Page 13
8.2 By the end of March 2024, it is estimated that 541 Council houses will have been built since 2011, 325 former council houses purchased, and 12 properties converted into flats for social rent. An update is provided on each of these below. Building new houses for social rent 8.3 The aim of the Council’s new build housing programme is to provide high quality affordable housing to meet housing need within the area, using grant funding provided by the Scottish Government. Between 2011 and 2024, the Council will have built 541 new builds. 8.4 The size, type, location, and funding of the new build programme is determined through the Strategic Housing Investment Plan, which was approved by the Housing and Social Wellbeing Committee on 29 November 2023 (Report No. 23/336 refers). 8.5 The Scottish Government recently announced an increase in the grant funding per unit available to Local Authorities. This increased funding will vary by development, and it is intended to offset the increased costs of construction and enable the HRA to continue to build social housing over the next 5 years. The Capital Investment Programme assumes the Council house building programme will continue to receive the same level of financial funding per house from the Scottish Government. It also assumes the continued use of the Council’s Earmarked Reserve for Affordable Housing. 8.6 The Capital Investment Programme, detailed in Appendix 4, incorporates the existing committed, 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. These will be reported to Committee once confirmation is received that sites are viable projects. Purchasing former Council houses (buybacks) 8.7 The Capital Investment Programme also includes funding for increasing Council house stock by purchasing houses through the open market. It is anticipated that by 31 March 2024, 325 houses will have been purchased at a cost of approximately £42 million (including upgrading to SHQS). As a result of the purchase of these properties, an additional 344 moves have been facilitated through the resulting vacancy chains, supporting a total of 669 households into more suitable accommodation. 8.8 The capital investment programme has £20 million of funding allocated for buy- backs over the next 5 years, with the potential to allocate additional money to this from the overall budget for increasing our Council stock. This funding will be accelerated as and when required, as properties become available to purchase. 8.9 The Council has been successful in obtaining funding, in addition to the Housing Allocation Grant from the Scottish Government, for the period 2013/14 to 2023/24 of £10.4 million. This additional funding has allowed the purchase of approximately 87 properties over and above the existing budget within the Capital Investment Programme.
Page 14
9. RENT STRATEGY 9.1 When setting the 2023/24 budget, the Housing and Social Wellbeing Committee approved a 2.2% rent increase for 2023/24 and a four-year rent strategy for 2024/25 to 2027/28 at an indicative rate of 2.2% (Report No. 23/9 refers). 9.2 This provided a baseline level for tenants. It also allowed the Council to highlight the potential future rent increase required to deliver the capital investment programme and running costs of the HRA. 9.3 In order to meet the tenant’s priorities gathered through the extensive consultation, Scottish Government requirements along with legislation in relation to climate change and EICRs, and to meet the fixed costs borne by the HRA, a 6.0% rent increase (option 1) will be required for 2024/25. The proposed increase of 6.0% reflects the views of our tenants as noted in section 5.32 whilst maintaining the financial health of the HRA Business Plan. 9.4 The proposed rent strategy for the four-year period from 2025/26 to 2028/29 will be set at an indicative rate of 4.5% based on the know pressures for 2025/26, then an anticipated minimum of 2.2% for the following 3 years. The actual agreed level will be dependent on the outcomes of tenant feedback and the wider HRA rent setting process. 9.5 This strategy was agreed with tenants, with the aim to provide a guide on potential future rental increases. However, the actual increase is based on future pressures and as a result of consultation with tenants on their spending priorities for future years, which change year on year. The rent strategy will be reviewed in consultation with tenants based on the findings of our retrofit assessments. These assessments will inform the level of capital investment required to meet future energy efficiency standards. 9.6 The current rent strategy as detailed above allows the HRA to: • set rents at reasonable levels over the period, maintaining Perth and Kinross Council rents lower than the Scottish average • demonstrate affordable rents for our tenants • finance the cost of the future investment programmes to continue to improve our housing stock • provide headroom to allow for a commitment of 80 new houses each year • increase the 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 (541 houses to date) • continue to resource Locality Teams in managing tenancies, foster tenant participation and work with partner colleagues in the community to create safe and vibrant neighbourhoods • enable a Reserves Strategy to provide uncommitted reserves of £1million.
Page 15
10. USE OF BALANCES/RESERVES STRATEGY 10.1 When reviewing their medium-term financial plans and preparing annual budgets, local authorities should consider the establishment and maintenance of reserves. These can be held for three main purposes to: • 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, therefore, not being directly used to deliver the Housing Business Plan but is set aside for the purposes outlined in section 1. 10.3 The financial risks to which the HRA could potentially be exposed include the possibility of: • additional repairs due to severe weather events and other emergencies, such as the Covid-19 pandemic • the current economic climate • increasing rent arrears • new legislation such as climate change and other statutory guidance • the economic conditions, which could also impact on commercial lets, resulting in lower rent levels or properties remaining void for longer periods. • significant weather events 10.4 In view of the potential risks facing the HRA and, in accordance with guidance set out in the CIPFA Local Authority Advisory Panel Bulletin (LAAP) 99 (published in July 2014), the Head of Finance, therefore, recommends retaining an uncommitted reserve on the Housing Revenue Account of between 2% and 4% of gross expenditure – approximately £720,000 to £1,440,000. This will be reviewed in future years and amended as required. 10.5 At the Housing and Social Wellbeing Committee of 25 January 2023, members agreed that the HRA should maintain an uncommitted general reserve balance of £1,000,000 (Report No. 22/15 refers). After reviewing the 30-year business plan, it is felt prudent that the balance should continue to be maintained at the present level. The business plan assumes that a balance of £1,000,000 will be maintained for the next 5 years. 10.6 At this time, it is not anticipated that there will be any requirement to utilise the reserve in 2023/24 and consequently the balance will remain at £1,000,000. 10.7 At the Housing and Social Wellbeing Committee of 25 January 2023, members agreed that the final movement on the Housing Revenue Account was transferred into the Covid-19 Reserve (HRA) (Report No. 23/9 refers).
Page 16
10.8 On 22 November 2023, the Council was advised of a projected underspend of £113,000 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. 23/315 refers). 10.9 The latest monitoring position that will be presented to Council in February will set out a negative movement from the previously reported position of approximately £300,000, primarily in relation to the increased pay award. The results in a projected overspend for the HRA of £187,000. 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 31 January 2024 and the final outturn is transferred to the earmarked Covid-19 Reserve (HRA). 11. COMPARISON WITH OTHER LOCAL AUTHORITIES AND REGISTERED SOCIAL LANDLORDS 11.1 Appendix 5 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 £6.84 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 rental figure of £79.74 compared to the projected Scottish average of £85.10 for 2024/25. This would mean Perth and Kinross Council would have the 5th lowest rent in Scotland, £5.36 lower than the projected Scottish average. 11.4 The level of rent increases for 2023/24 across local authorities in Scotland ranged from 1.5% to 6.4%, with the Scottish average being 3.7%. 11.5 Table 1 below details 2022/23 average rent levels for the main Registered Social Landlords (RSLs) within Perth and Kinross. Registered Social Landlord 2022/23 Bedroom Size/Weekly Rent (£) Bedsit 1 2 3 4+ PKC 50.45 68.48 74.54 83.66 89.19 Caledonia 109.39 100.54 90.62 97.85 107.79 Hillcrest HA 63.13 82.10 94.12 105.30 114.87 Kingdom HA 68.69 79.72 88.41 98.99 103.91 Table 1: Average Rents 2022/23 (based on 52 weeks) Source: Scottish Housing Regulator 2022/23 Landlord Reports
Page 17
11.6 During last year, we were involved in a benchmarking exercise to compare the financial health of HRA Business Plans across local authorities in Scotland. This exercise evidenced 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), are amended as detailed below from 1 April 2024. The proposals ensure the Council continues to demonstrate that it has set rents which 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 It is proposed to have 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 It is proposed to have a 6.0% increase on rental charges for properties owned by the HRA but allocated as temporary accommodation for homeless people to reflect the rental strategy for mainstream rents. Lock-ups 12.4 It is proposed to have a 6.0% rent increase for lock-ups to reflect the rental strategy for house rents to reflect the continued investment in repairs and maintenance and planned maintenances. Garage Sites 12.5 It is proposed to have a 6.0% rent increase for garage sites to reflect the rental strategy for house rents to reflect the continued investment in repairs and maintenance and planned maintenances. 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. 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 which may not be provided to every tenant, or which may relate to communal facilities rather than directly to the occupation of a dwelling. In addition, 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
Page 18
in tenants’ rents. Owner occupiers in locations with mixed tenure 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 normally reviewed in line with the current agreement for Market, Milne & Lickley. 13.5 Last year we consulted with approximately 300 tenants and private owners on the proposed heating and lighting charges from April 2023. The outcome of the consultation was that tenants and private owners wished the charges to remain the same to support with the increased charges from April 2024. 13.6 As predicted, the charges for 2024 have significantly increased for all but one of our properties. Consideration was given to a phased approach, however this could also have a further negative impact on tenants if charges were to rise again. To support tenants and private owners impacted by this increase, specific information has been provided and a range of support measures have been put in place to ensure they are fully informed and offered tailored advice and assistance. Many of the tenants within our sheltered housing complexes will also be entitled to financial support through the winter fuel payment and warm home discount, which can provide up to £750 per household. There is also further financial assistance available to all tenants through winter heating payment and home heating support fund. Support to access these funds and payments will continue to be made to all tenants and residents. 13.7 The tables in sections 13.8 and 13.9 have been updated to reflect the outcome of the consultation process detailed above. 13.8 The revised service charges to tenants for garden maintenance and communal energy costs are outlined below: Service Charges to Tenants 2023/24 Current Annual Charge 2024/25 Proposed Annual Charge 2024/25 Proposed Increases Garden Maintenance Scheme £124.00 £124.00 £0 Retirement Complexes £239.20 £253.24 £14.04 Communal Energy Costs – (Market, Milne and Lickley) £304.72 £791.44 £486.72 Heating and Lighting at Sheltered Housing complexes £307.32 - £587.08 £791.96 - £1,334.84 £484.64 - £747.76 Table 2: Service Charges to Tenants
Page 19
13.9 As a result of the Property Factors agreement being in place since 1 April 2014, Housing & Health Committee approved a range of charges to owner occupiers of multi-tenure blocks (Report No. 14/114 refers). These charges are reviewed annually in line with the actual cost of the service being provided with the proposed 2024/25 charges detailed in table 3 below: Service Charges to Owner Occupiers 2023/24 Current Annual Charge 2024/25 Proposed Annual Charge 2024/25 Proposed Increases Stair Lighting £28.88 £29.12 £0.24 Market Court £844.77 £1,339.07 £494.30 Milne Court £844.86 £1,339.15 £494.29 Lickley Court £844.97 £1,339.27 £494.30 Potterhill £471.74 £444.77 -£26.97 Pomarium (Nos 7-51) £432.28 £491.47 £59.19 Pomarium (Nos 52-95) £432.88 £492.07 £59.19 Table 3: Service Charges to Owner Occupiers Rechargeable Repairs 13.10 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: - • recover the cost of work arising from tenant misuse • consistently enforce the conditions of the Scottish Secure Tenancy • deter misuse and negligence of Council property 13.11 A summary of all housing charges for 2024/25 is detailed at Appendix 6. 14. CONCLUSION 14.1 This report details the proposed HRA budget for the 5-year period from 2024/25 - 2028/29 and recommends rent increases for houses and other HRA properties. 14.2 The recommended 6.0% increase, detailed in option 1, is in line with the views of our tenants. This will ensure that our rent levels remain affordable to our tenants and projected to be 5th lowest in Scotland, continue to compare favourably at a national level.
Page 20
14.3 The measures outlined will support continued and sustained improvements in the delivery of housing services. More specifically, they will: • provide investment in our repairs and maintenance and service and maintenance budgets to meet the current level of demand and ensure that performance standards are met • ensure that our properties have an up-to-date electrical inspection condition reports to meet our legal obligations • provide capacity to enable us to work towards our climate change targets by reducing the carbon footprint of our homes whilst making sure they remain affordable to heat. • increase our housing stock and support the delivery of our new build commitments and meet housing need in the area. • continue to invest in their 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 need in the area, provide safe and secure housing, as well as support sustainable tenancies and communities throughout the area.
Page 21
Authors Name Designation Contact Details Steven Coyle Elaine Ritchie Finance & Governance Team Leader Senior Service Manager (Communities) ComCommitteeReports@pkc.gov.uk 01738 475000 ComCommitteeReports@pkc.gov.uk 01738 475000 Approved Name Designation Date Barbara Renton Executive Director (Communities) 11 January 2024 Scott Walker Strategic Lead – Finance and Business Support 21 December 2023 APPENDICES • Appendix 1 – HRA Provisional Revenue Budget 2024-2029 • Appendix 2 – Feedback from tenant’s rent survey • Appendix 3 – HRA Executive Summaries 2024-2029 • Appendix 4 – HRA Capital Investment Programme 2024-2029 • Appendix 5 – Estimated Projected Average Rents • Appendix 6 – Housing Related Charges 2024-25
Page 22
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 all of the priorities within the Community Plan 2022-27. (i) Reducing Poverty (including child poverty, fuel poverty and food poverty) (ii) Mental and physical wellbeing (iii) Digital participation (iv) Skills, learning and development (v) Employability Corporate Plan 1.2 This report supports the objectives within the draft new Corporate Plan:- (i) Children and young people grow up safe, respected, well-educated, and confident in their ability to realise their full potential; (ii) People and businesses are increasingly able to prosper in a local economy which support low carbon ambitions and offers opportunities for all; (iii) People can achieve their best physical and mental health and have access to quality care and support when they need it; (iv) Communities are resilient and physically, digital and socially connected; (v) Perth and Kinross is a safe and vibrant place, mitigating the impact of climate and environmental change for this and future generations.
Page 23
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. Legal and Governance 3.7 The Strategic Lead, Legal and Governance was consulted on this report.
Page 24
Risk 3.8 None arising from this report. 4. Consultation Internal 4.1 The Chief Executive, all Directors and the Strategic Lead, Legal and Governance 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 report is well put together, informative and answers questions around future spending. However, there are concerns that if rents keep rising by 6% this might contribute to higher incidents of arrears.” 5. Communication 5.1 None. 2. BACKGROUND PAPERS 2.1 None.