Agenda item

The Assistant Director – Programmes, Investment and Development’s report provided the Housing Review Board with an update on the Housing Revenue Account (HRA) Business Plan and associated strategic documents that underpinned the effective management and investment in East Devon District Council’s housing stock to ensure the housing service remained financially viable, sustainable and responsive to tenants’ needs.  The HRA Business Plan would provide the overall financial framework for the HRA. 

The HRA continued to face significant financial pressure in the immediate and longer term.  These pressures arose from a range of factors including an historic underinvestment, increased consumer and regulatory standards, general inflation, restricted rent increases, net zero expectations, disrepair claims, complaint resolution, high void and decant costs and other issues. The situation was not unique to East Devon with similar cost pressures being seen amongst other housing providers and stock holding local authorities. 

The 2023/24 HRA budget outturn and capital spend far exceeded the planned budget, necessitating the contribution of all HRA earmarked revenue reserves and required £2.5m additional borrowing.  The HRA adopted balance reserve was also reduced.  A revised budget for 2024/25 was approved by Council in July 2024.  Improved budget management, monitoring and controls meant the 2024/25 budget outturn was within budget at year end.  This represented a significant improvement on the previous year and reflected significant improvements in financial planning and management of the HRA.

The previous HRA Business Plan had expired and needed updating to reflect current circumstances and the future investment needs of the stock.   The purpose of a Business Plan was to ensure long term financial sustainability over a 30-year period and ensure sufficient resources were available for the management, maintenance, repair and improvement of the stock.  Business Plans should also consider maintaining stock levels through acquisitions, development and estate regeneration.  The HRA Business Plan looked at development and stock regeneration, as well as considering land and assets that were underutilised.  The key element was how this was balanced with investment in existing stock.  The conclusion was that any development would need to pay for itself.

In order to support the required level of borrowing for stock maintenance and investment the HRA needed to reduce the revenue expenditure by 15% (£2.6m) in order to retain debt within a manageable capacity.  Whilst achievable, the scale of reduction was significant and highly challenging.  It was therefore essential that an Efficiency Plan was established to achieve a long-term sustainable position.  An ongoing internal review had identified a number of opportunities for improved efficiency and cost reductions.  Any savings or efficiencies would be based on the key principle of finding alternative approaches to service delivery to ensure the quality of tenant services were maintained or improved.  Other elements of the Efficiency Plan included income maximisation and effective asset management to boost income and tackle poor asset performance.

The report outlined that a formal Business Plan would be published later in the current financial year with formal adoption to align with the 2026/27 budget.  The plan would set the financial framework for budget setting and capital investment over the medium term.  The Asset Management Strategy would be completed and presented prior to the start of the 2026/27 financial year.

It was noted that a stock transfer was not a viable option at this point in time so had been discounted as an option.

There were a number of assumptions in the Business Plan, which was a long term forecast.  There were a number of variables and it was important to review the Business Plan on an annual basis.  Assuming the efficiencies and reductions outlined in the report were delivered, modelling suggested a sustainable position was achievable within the overall plan period.

RECOMMENDED:  that Cabinet note the Housing Revenue Account Business Plan position and required efficiency savings.