HRA Rent and Budget Setting 2019/20 1
The Housing Revenue Account • The Housing Revenue Account (HRA) is a ring fenced account which cannot be subsidised from the General Fund and any surplus or deficit in the HRA is carried over to the next financial year • The HRA operates under the self financing regime introduced by Government in April 2012 • This required the Council to take on approx. £170m debt and develop a 30 year business model • Proposals for this budget setting year continue to be driven by the financial planning that underpins the model to deliver services and capital investment 2
Lambeth Housing Standard • To date 28,825 tenanted and leasehold properties have been brought up to LHS standard. • £35m capital expenditure expected in the current year, with a further £35m expected in 2019/20. • This requires careful management of the finances to ensure there is adequate funding to support the programme whilst maintaining sufficient reserves • The works have meant more tenants benefitting from major capital investment to their homes 3
Fire Risk Work • Additional capital costs of £2.173m for Fire Risk work in 2017/18 following the Grenfell Tower disaster. • Further forecast investment of £1.959m required in 2018/19. • To date £1.894m has been spent on the removal of cladding and £0.614m on emergency fire works. • There will be significant additional fire safety costs in the future, for example a fire door replacement programme costing £20m over the next four years and fitting sprinklers at a cost of £2.9m. • These costs are being carefully managed through the HRA business plan but will require some additional borrowing in the short term. 4
Housing Revenue Account • The General HRA balance as at 31 March 2018 was £10.750m • Aim is to hold General HRA balances of 5-10% (Currently 6.3%), with a minimum level of £10m on a sustainable basis and use balances above that to deliver the capital investment programme • The Council has a total of 23,934 tenanted properties and there are a further 9,769 leasehold properties 5
Housing Management: Performance (Sept 2018) • 94.9% of collectable rent, including arrears, is forecast to be collected (target 95.1%) • Voids – In 2018/19 average void lengths for all voids is 22.2 days (target 21 days). 6
Setting The Rents: Rent Policy • Following the Summer 2015 budget there is an enforced rent reduction of 1% per year for the four years 2016/17 – 2019/20 • Overall goal is to support the HRA 30-year business plan in terms of service delivery and capital investment • The reduction in rents compared to the 2015/16 business plan is expected to create a £28.4m funding shortfall once the full four-year impact is factored in • Savings options have been delivered to manage this shortfall within the HRAs management costs and efficiencies, but cuts on this scale impact on service provision. 7
Setting The Rents: Rent Policy • The enforced rent reduction of 1% does not apply to any PFI properties. There is provision to increase rents for those PFI properties. • We have chosen not to increase the rent for those affected properties and intend to apply the 1% rent reduction in line with the rest of the Council’s homes so that residents in those properties are not adversely affected. 8
Impact – 1.0% Decrease Bedrooms % of dwelling Avg weekly rent Avg weekly rent Average % Decrease stock 2018/19 2019/20 Decrease Studio 3.79% £77.21 £76.44 £0.77 1% 1 Bed 27.91% £91.41 £90.50 £0.91 1% 2 Bed 35.03% £104.40 £103.36 £1.04 1% 3 Bed 26.34% £120.39 £119.19 £1.20 1% 4 Bed 5.62% £138.91 £137.52 £1.39 1% 5 Bed 0.95% £151.71 £150.19 £1.52 1% Over 5 Bed 0.36% £163.56 £161.92 £1.64 1% 9
Service Charges • Service charges are set on the basis of recovering the estimated cost of providing the service • Service charges are made up of two main elements – costs directly incurred by the Council in providing the service and allowances paid to Tenant Management Organisations (TMO’s) in providing the service. • In 2017/18 a new TMO model was compiled to calculate these allowances. There were significant changes to some of the allowance calculations which has impacted on the service charge calculations. 10
Service Charges • Overall in 2019/20 there is a reduction in the common service charges of 6.9%, a reduction of 1.1% in heating and hot water charges and an overall increase of 1.1% for specific charges • Garage and shed charges remain unchanged. 11
Service Charges Proposal Service Charge 2018/19 2019/20 Movement (per week) (per week) Common service charges Caretaking £0.94 £1.34 £0.40 Grounds Maintenance £1.39 £1.25 (£0.14) Estate Cleaning £6.34 £5.71 (£0.63) Communal Lighting £2.94 £2.48 (£0.46) Disinfestation £0.76 £0.74 (£0.02) Total £12.37 £11.52 (£0.85) Heating and Hot Water (Average) £10.47 £10.35 (£0.12) 12
Service Charges Proposal (cont’d) Service Charge 2018/19 2019/20 Movement (per week) (per week) Specific service charges TV Aerial (£0.10) £0.23 £0.13 Concierge £18.03 £16.56 (£1.47) CCTV £2.44 £2.74 £0.30 Door Entry – Audio £1.55 £2.23 £0.68 Door Entry – Video £2.34 £3.19 £0.85 Total £0.26 £24.59 £24.85 13
Garages & Sheds – Charges Proposal Service Charge 2018/19 2019/20 Movement (per week) (per week) Garages Category A – T enants £19.00 £19.00 £0.00 Category B – Resident Leaseholders £22.50 £22.50 £0.00 Category C – Non-Residents £36.00 £36.00 £0.00 Category D – Blue Badge Holders N/A £0.00 £0.00 Category E – Council Interest £0.00 - £0.00 - Dispensations* £36.00** £36.00** £0.00 Sheds General £0.00 £3.00 £3.00 * Garages that are currently let for either community use or under special arrangements due to non-uniform size **Level of charge to be agreed by Director of Housing Services 14
Comparison of Service Charges Service Charge 2016/17 2017/18 2018/19 2019/20 Charge Charge Charge Charge (per week) (per week) (per week) (per week) Common service charges £1.27 £0.94 £1.34 Caretaking £1.40 £1.38 £1.39 £1.25 Grounds Maintenance £1.46 £6.40 £6.34 £5.71 Estate Cleaning £6.50 £2.85 £2.94 £2.48 Communal Lighting £2.90 £0.77 £0.76 £0.74 Disinfestation £0.82 Total £12.67 £12.37 £11.52 £13.08 Heating and Hot Water (Average) £15.02 £11.01 £10.47 £10.35 15
Comparison of Service Charges Service Charge 2016/17 2017/18 2018/19 2019/20 Charge Charge Charge Charge (per week) (per week) (per week) (per week) Specific service charges TV Aerial £0.27 £0.26 £0.23 £0.13 Concierge £16.34 £18.53 £18.03 £16.56 CCTV £2.33 £2.42 £2.44 £2.74 Door Entry – Audio £1.47 £1.53 £1.55 £2.23 Door Entry – Video £2.23 £2.32 £2.34 £3.19 Total £22.64 £25.06 £24.59 £24.85 16
Comparison of Service Charges Service Charges (per week) 2016/17 2017/18 2018/19 2019/20 Garages Category A – T enants £12.23 £12.23 £19.00 £19.00 Category B – Resident Leaseholders £12.23 £12.23 £22.50 £22.50 Category C – Non-Residents £21.06 £30.00 £36.00 £36.00 Category D – Blue Badge Holders £0.00 £0.00 £0.00 £0.00 Category E – Council Interest £0.00 - £0.00 - Dispensations* £0.00 £0.00 £36.00 £36.00 Sheds General £1.00 £1.00 £3.00 £3.00 17
Income: pence per £1 2019/20 Contributio Interest and other income, n from Non-dwelling rents, 3p 3p Balances, 1p Leaseholder service charges, 7p Tenant service charges, 8p Dwelling rents, 78p 18
Expenditure: pence per £1 2019/20 Revenue Financing of Cost of debt, 12p Capital, 2p Management, 37p Depreciation, 19p Provision for bad debt, 1p Other Expenditure, 3p Repairs, 17p Provision of services, 9p 19
Comparison of Income: Pence per Pound Income 2018/19 2019/20 Dwelling Rents 77p 78p Tenants Service Charges 10p 8p Leaseholder Service Charges 7p 7p Non Dwelling Income 2p 3p Interest & Other Income 4p 3p Contribution from Balances 0p 1p Total 100p 100p 20
Comparison of Expenditure: Pence per Pound Expenditure 2018/19 2019/20 Management 34p 37p Provision of Services 8p 9p Repairs 18p 17p Other Expenditure 5p 3p Provision for Bad Debt 3p 1p Depreciation 17p 19p Cost of Debt 12p 12p Contribution to Reserves 3p 2p Total 100p 100p The movement in Management costs is the result of the re-mapping of costs under different headings, for example from other expenditure 21
Meeting Timetable • Sheltered Housing Forum – 23 rd October 2018 • Tenants’ Assembly – 31 st October 2018 • Cabinet Meeting – 17 th December 2018 22
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