Agenda item

Finance Report


The accountant’s report provided the Housing Review Board with current year to date and draft forecast financial outturn figures for the Housing Revenue Account (HRA) for the 2022/23 financial year.  The report also considered the implications of any forthcoming regulatory changes.


Producing a HRA has been a statutory requirement for Councils who manage and own their housing stock for some time, and therefore a key document for the Board to influence.


The report also made reference to the recent Government launched consultation on the social housing rent cap and invited members to debate the topic in order to capture information that can be put forward as part of the consultation process.


It was noted that the HRA was in a healthy position.  The original approved budget generates a surplus of £0.208m in 2022/23. This sum and any additional surplus is due to be added to the Capital Development Fund for future investment.


The most notable risks to the above outturn position, which will be kept under review, are;

·        Employee costs due to the uncertainty around the 22/23 pay award and the ongoing consultant pay review.

·        Income – the current high levels of income received may be at risk due to the increase in cost of living.


Inflationary pressures are also a concern and will be reviewed prior to and considered during the 23/24 budget preparation process with scenarios considered varying the four main drivers;

·        Income – currently set at CPI + 1%, June being the latest release which would mean an increase of 11.1% and is likely to go higher.

·        Interest Expense – currently fixed, however, refinancing will be required at the end of the year of £2.9m with interest rates rising.

·        Employees Costs & Overheads – currently 28% as a proportion of income received, pay awards for 23/24 will need to consider inflationary pressures.

·        Premises related costs – the remaining balance once all above assumptions are made to be reinvested into our stock


There has been very little in capital spend to date within the HRA with the acquisition of 42 Berry Close being the only material item.


The Housing Revenue Account update was noted.


The second part of the accountant’s report concerned the Social Housing Rent Cap Consultation.   


On the 31st August the Department for Levelling Up, Housing and Communities released a consultation document setting out a rent cap for social housing tenants as part of measures to protect tenants from further impacts of the cost of living crisis.


Under the current policy, rent is increased in line with the consumer price index (CPI) plus 1% which would currently mean a potential increase of 11% from April 2023 onwards. The consultation suggests a rent cap is imposed that will sit at either 3%, 5% or 7% and the Government are asking for views from the sector.


It was noted that the difference between the 10.8% rise compared to other scenarios is significant on income levels:

·        3% cap is a reduction in income of £1.473m a year

·        5% cap is a reduction in income of £1.095m a year

·        7% cap is a reduction in income of £0.717m a year


It was also noted that this income is not lost in just year one but will not be in the base income year after year.


Although the increase and implications on tenants affordability to meet this increase will and should be a key consideration of the Board and the Council, the cost of maintaining the housing stock will be increasing with inflation and by not keeping pace with increase income levels will necessary result in a reduction in available resources to meet current plans to maintain and improve stock.


This Council consulted with tenants by holding a workshop on 27 September 2022.  The outcome of the consultation was:

·        There was no definite answer in relation to the question on the rent cap as the tenants overwhelmingly felt that there was not enough information provided to be able to make an informed decision.

·        In order to take an informed decision they would require:

o   The amount of additional funding required to maintain the current level of service delivery as they understand the costs would have increased and they not wish the current service levels to deteriorate any further.

o   The impact on major / cyclical works delivery based on the levels of increase.

o   Whether any Health & Safety works are required by regulation / legislation which are non-negotiable –

o   The rent charged by other providers in Devon

o   The effect on residents claiming full and partial benefits and the numbers that would be effected.

·        They felt that management of repairs and contract management could be greatly improved and this would lead to additional funding without impacting rent levels.


In discussion, a tenant member expressed concern about the affordability of rent increases for tenants during the cost of living crisis, commenting that tenants will be worried that it will lead to them having no home to live in.



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