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MUNICIPAL YEAR 2009/10 REPORT NO. 193 MEETING TITLE AND DATE: CABINET - 10 February 2010 COUNCIL - 24 February 2010 JOINT REPORT OF: Director of Place Shaping and Enterprise Director of Finance & Corporate Resources Contact Officers: Darren Welsh, extn 4250, DDI 8379 4250 Email: Darren.welsh@enfield.gov.uk Fiona Peacock, extn 5033 DDI 8379 5033 Email: Fiona.peacock@enfield.gov.uk SUBJECT: Housing Revenue Account Estimates 2010/11 and Medium Term Financial Plan (Rent Setting – HRA) ALL WARDS CABINET MEMBERS CONSULTED: CLLR MATTHEW LABAN CLLR ERTAN HURER Item: 6 Agenda – Part: 1 1. EXECUTIVE SUMMARY 1.1 The report presents for approval the revenue estimates of the Housing Revenue Account (HRA) for 2010/11 following consultation with residents on the HRA budget position. 1.2 The Cabinet is asked to approve the level of rents and service charges to be operative with effect from 5th April 2010 for Council tenants. 1.3 The report also includes HRA projections over the medium term to 2014/15. 1.4 The report is based on the draft subsidy determination, the final determination is not expected until mid February at the earliest.
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Microsoft Word - Rentsetting1011Cabinetfinal0.docMUNICIPAL YEAR 2009/10 REPORT NO. 193 MEETING TITLE AND DATE: CABINET - 10 February 2010 COUNCIL - 24 February 2010 JOINT REPORT OF: Director of Place Shaping and Enterprise Director of Finance & Corporate Resources Contact Officers: Darren Welsh, extn 4250, DDI 8379 4250 Email: Darren.welsh@enfield.gov.uk Fiona Peacock, extn 5033 DDI 8379 5033 Email: Fiona.peacock@enfield.gov.uk
SUBJECT:
Housing Revenue Account Estimates 2010/11 and Medium Term Financial Plan (Rent Setting – HRA)
ALL WARDS
CLLR ERTAN HURER
Item: 6 Agenda – Part: 1
1. EXECUTIVE SUMMARY 1.1 The report presents for approval the revenue estimates of the Housing Revenue
Account (HRA) for 2010/11 following consultation with residents on the HRA budget position.
1.2 The Cabinet is asked to approve the level of rents and service charges to be
operative with effect from 5th April 2010 for Council tenants. 1.3 The report also includes HRA projections over the medium term to 2014/15. 1.4 The report is based on the draft subsidy determination, the final determination is
not expected until mid February at the earliest.
3. BACKGROUND 3.1 Each year the Council is required by law to set the level of rents for Council
dwellings for the forthcoming financial year after consultation with tenants. The decision must be taken early enough for tenants to be advised of any change at least 4 weeks prior to the date of change. The following sections of the report set out the financial position on the HRA for Cabinet and Council to consider.
3.2 The 2010/11 Government subsidy determinations are based on an average
guideline rent increase of 3.1% applied to the 2009/10 formula rent. 3.3 The rent increase for 2009/10 was based on a formula rent increase of 3.1% with an
inflation increase of 5%. Members will recall that this increase was applied retrospectively in 2009. (Cabinet report 17/6/09) The government originally set the guideline rent increase at 6.2% but changed this to 3.1% after the rents had been set during 2009.
4. FORMULA RENTS and SERVICE CHARGES 4.1 The Government decided in 2003/04 that Local Authority and Registered Social
Landlord rents should be calculated using a formula based system. Accordingly, since 2003/04 Enfield rents have been calculated using the formula based on the market value of the property, average earnings for London manual workers and the
2. RECOMMENDATIONS 2.1 That the detailed revenue estimates of the Housing Revenue Account for 2010/11
be approved and the forecast for the medium term be noted (table 1). 2.2 That the formula rents be increased by 3.1% in line with Government guidance. This
will result in an average increase of 0.4% for Enfield tenants. (The difference between formula and actual is caused by the negative RPI of 1.4% this year and other factors within the calculation.)
2.3 The level of service charges as set out in Para 16 for those properties receiving the
services be agreed for 2010/11. 2.4 That the proposals for increases in other income as detailed in Appendices 2 and 3
be agreed for 2010/11. 2.5 That the Temporary Accommodation rents as set out in Appendix 5 be agreed for
2010/11. 2.6 That authority be delegated to the lead members for Housing and Finance to agree
any changes in recommendations to Council should the final subsidy determination show any amendments.
national average council rent. The formula also takes account of the number of bedrooms in the property.
4.2 In addition to the rents, tenants may also be charged a service charge for certain
communal services as appropriate. Government guidance gives some discretion over which services may be charged separately. The proposed charges for 2010/11 are shown in paragraph 16. There are no proposals for the introduction of new service charges in 2010/11. A review of the Concierge service was planned for 2009/10 this is still ongoing and this may change the service charge in future years. In addition grounds maintenance and caretaking charges will be reviewed in 2010/11. Residents will be consulted on any proposed changes.
4.3 The change to formula rents, together with the separate charging for services,
would have meant significant increases or decreases for some tenants if introduced immediately. In recognition of this the Government decided that the move to the new formula rents would be phased and that no rent should increase by more than £2 per week plus inflation after adjustment for the annual guideline increase set by Government.
4.4 Members will be aware that under the current system additional rent raised is in
effect paid to the Government through the subsidy mechanism. This payment has decreased from £8.44m following the 2009/10 amended determination to an estimated £8.00m in 2010/11. However this is due to the additional allowance of £975k for the cost of borrowing £50m for decent homes. If this is not included then Subsidy repayment to government has increased by £462k.
5. SUBSIDY DETERMINATION 5.1 The rents and budget are set on the basis of the subsidy determination from the
Department for Communities and Local Government (CLG). The subsidy determination for 2010/11 was extremely late and the consultation on the draft determination did not close until 25th January 2010. It is therefore unlikely that the final determination will be available until mid February. No changes are anticipated however if these were to occur and be unfavourable then any deficit could be a call on HRA reserves. In view of this cabinet is asked to delegate authority to the lead members for Housing and Finance to agree any changes in recommendations to Council should the final subsidy determination show any amendments.
6. REVIEW OF COUNCIL HOUSING FINANCE & HRA SELF FINANCING 6.1 The Department for Communities and Local Government (CLG) completed the
consultation on the review of HRA Finance in October 2009. This looked at potentially removing the current Housing Revenue Account Subsidy system and replacing it with a localised self-financing system for all councils.
6.2 The consultation covered the principles for paying off Housing debts and local
authorities controlling their revenue and rental streams and abolition of Housing Subsidy and pooling of housing capital receipts. The review also looked into the possibility of using grants to support non decent works. The outcome of the review
will be announced shortly and it is likely that the proposed changes will impact on the HRA budget from 2011/12 onwards.
6.3 There was insufficient detail in the consultation to assess the impact on Enfield’s
HRA, however it is anticipated that further information will be available in the next three months.
6.4 CLG has also indicated that it is still reviewing formula rents and there may be
further changes.
7. FINANCIAL MONITORING 2009/10 7.1 Before considering the proposals for 2010/11, it is necessary to review the
estimates for the current financial year to determine the anticipated balances as at 31 March 2009 and to take into consideration the ongoing impact of any major changes that have occurred during the current year. These have been highlighted throughout the year in the regular financial monitoring reports; the latest monitoring report is indicating a net surplus of £418k on the HRA.
7.2 A summary of the major changes in 2009/10 based on the November monitoring
position is shown in Appendix 1. Where appropriate, the ongoing impact of these variations has been included in the draft budget for 2010/11.
8. CONSULTATION ON THE LEVEL OF RENT FOR 2010/11
8.1 Consultation took place in January 2010. Residents were advised that estimated budget pressures totalling £3.83m had been identified for 2010/11. Savings and restructuring of existing HRA budgets have resulted in a balanced HRA budget. However, £115k of reserves will be used to achieve this.
9. BASE BUDGET FOR 2010/2011 9.1 Table 1 sets out the Base Budget for 2010/11 compared to the 2009/10 figures and
include projections for the next 4 years to 2014/15. These projections are based on the updated HRA business plan.
T A
B L
E 1
3 3
10. BASE BUDGET ASSUMPTIONS AND MAJOR VARIATIONS 10.1 Table 2 sets out the assumptions made in compiling the budget and medium term
projections. TABLE 2 - ASSUMPTIONS
Garage income 2%
Interest rate on borrowing (CRI) 4%
Interest rate on balances 0.5%
Government Subsidy assumptions
Formula rent increase 3.1%
Major Repairs allowance 4.2%
Management and Maintenance 4.0%
10.2 Explanations of the major variations for 2010/11, when compared with the budget
for 2009/10 are as follows. 10.2.1 Supervision & Management General - decrease of £812k This is mainly due to a decrease of £700k in the management fee. This is
because of stock loss and efficiency savings of 3% by Enfield Homes. This is offset by budget increases as a result of additional funding required for under occupation and community festivals.
10.2.2 Special Services - decrease of £42k
Special services include grounds maintenance caretaking and energy costs. There are a number of pressures and savings in these areas however the largest saving is from energy costs.
10.2.3 Rents Rates and other – decrease of £814k This is due to the return of North circular road properties to Transport for London
for sale to Notting Hill. It should be noted that this reduction in costs will be offset by an increase in subsidy paid back so there is no overall financial benefit.
10.2.4 Rent rebate subsidy limitation – decrease of £160k When the cost of rent rebates was moved to the General Fund the government
required the HRA to make contributions to the cost of rent rebates. It did this because it deemed the HRA rents to be too high. This is no longer the case so the HRA does not have to make any further contributions and the cost of benefit is now fully met by the Department for Work and Pensions (DWP).
10.2.5 Cost of borrowing and premiums and discounts – increase of £1,303k This is mainly as a result of additional financing of £1,337k required for Decent
Homes. This amount is offset by a small change in the Premium & Discount payments of £34k. The borrowing from Decent Homes is supported through the HRA subsidy so there is no cost to the HRA.
10.2.6 Depreciation – increase of £417k There is a requirement to include an amount for depreciation of HRA assets in
the HRA. This sum is determined by the amount the government allows for Major Repairs in the subsidy calculation. There will be no impact on actual costs to the HRA as this is an accounting adjustment.
10.2.7 Repairs and Maintenance –use of repairs fund £500k Inflation has not been added to the 2010/11 budget however the intention is to
make contributions from the repairs fund of £500k. This represents no change to the base budget but a significant reduction in the amount that will be spent on repairs and maintenance. The last rent setting report estimated that £1.6m would be needed from the repairs fund each year. The use of the fund was reviewed during 2009/10. Recent projections show that only £700k will be used in 2009/10 because Enfield Homes have achieved a considerable saving on previous year’s expenditure. The reduction in expenditure for 2010/11 is sustainable because of the increased capital programme including the decent homes work. In addition £500k will be earmarked for winter maintenance if necessary.
10.2.8 Subsidy – decreased payment of £748k to CLG The subsidy payment is based on the calculation of a notional Housing Revenue
Account. The government has estimated that the guideline rent should increase by £1,421k. This is offset by increases in Management and Maintenance allowances and MRA (major repairs allowance) of £1,371k.
The support for borrowing has been increased by £1,184k to fund additional ALMO borrowing for Decent Homes.
The council was allowed subsidy on the lease costs of Transport for London properties. As the lease of TfL properties is ending the subsidy will be reduced by £745k.
The combination of the above and an additional allowance for loss of income due to caps and limits on rents has resulted in a reduction in the amount paid to the CLG, however there is no benefit to the council because of the increased borrowing costs for the decent homes funding
10.2.9 Dwelling rents income – decrease of £1,132k This represents the additional income from an actual average increase in rents of
0.4% (based on a formula increase of 3.1% and a reduction of 1.4% for negative RPI inflation). In addition there is a significant reduction because of the loss of income from North circular road and Ladderswood properties.
10.2.10 Garages income – increase of £29k This represents a 2% increase in total garage rent income. This is to cover cost
of management and maintenance of the garages. 10.2.11 Shop income – increase of £172k Shop income is estimated to be higher in 2010/11 due to review of aerials income
budget. This is offset by increase in voids for commercial shops and some demolitions.
10.2.12 Leaseholder Service charge income – increase of £28k Leaseholder service charge income reflects the actual cost of the services
provided. The costs of these services are expected to decrease in 2009/10 as a result of a review of the CCTV service and the reduction in the service charge.
10.2.13 Interest on balances (income) – increase of 44k It is anticipated that £35m will be borrowed in 2010/11 to fund Decent Homes.
The increase in monthly HRA balances as a result of borrowings and improvement in interest rate have led to increase in the interest on balances expected in 2010/11. Interest rates were estimated at 0.25% at the start of 2009/10, however the actual to date has been 0.45% the projection for 2010/11 is based on an average rate of 0.50%.
11. MEDIUM TERM FINANCIAL PLAN: 2010/11 – 2014/15 11.1 It is difficult to predict future HRA costs with any certainty, mainly because
subsidy arrangements are uncertain in the medium term. The Department for Communities and Local Government (CLG) has recently concluded a consultation on the future of Housing Finance. It is expected that the outcome of the review will have a major impact on future financing of HRA.
11.2 It is anticipated that further information will be available from the CLG in the next
few months and this may include proposals for opting out of the HRA subsidy system. However given that the outcome of the next comprehensive spending review is not yet known there is considerable uncertainty around future HRA funding.
11.3 The projections for 2010/11 – 2014/15 in table 1 have been calculated on the
basis of the current subsidy arrangements. 11.4 The HRA business plan, based on available information and current assumptions
about HRA debts and subsidy, show that the HRA will be in deficit in 2017/18; this is after assuming 3% savings in management and minimal increase in repairs expenditure. This is a similar position to a number of other London boroughs.
11.5 Savings will be needed to balance the Housing Revenue Account in future years.
Action is in hand within Enfield Homes and the Council to ensure a robust efficiency programme is in place. However this will be fully developed once the impact of the changes on the Housing finance system are known. The current HRA business plan position is outlined below.
TABLE 3 – HRA BUSINESS PLAN SUMMARY Year £’Million 2010/11 10.5m 2011/12 9.9m 2012/13 9.4m 2013/14 9.1m
2014/15 8.0m 2015/16 5.5m 2016/17 1.6m 2017/18 (3.6m)
12. ENFIELD HOMES MANAGEMENT FEE 12.1 Enfield Homes went live on 1st April 2008. Enfield Homes achieved two stars in its
inspection in February 2009. 12.2 As a result of the success in the inspection CLG made available funding of £15m
for the Decent Homes programme in 2009/10 and confirmed funding of £35m for 2010/11. No funding has been confirmed after 2010/11 so at this stage no assumption about additional funding after 2010/11has been included in this report.
12.3 Enfield Homes is paid a management fee by the Council for managing and
maintaining the Housing stock. Details of the services to be provided are included in the management agreement. The management fee agreed for 2009/10 was £17.2m
12.4 It is proposed that the management fee for 2010/11 should be £18.1.m this
includes additional funding for decent homes project management which will be capitalised. This fee has been the subject of detailed negotiations between the Council and Enfield Homes. The management fee for 2010/11 includes expenditure in table 1 under the headings Supervision, Management and Special services and part of the expenditure listed under Repairs and Rent rates and other.
12.5 In addition Enfield Homes will continue to manage the North Circular Road
properties for Notting Hill for the first six months of 2010/11 and will be paid a management fee of £74k. This is included within the proposed £18.1m management fee for 2010/11.
12.6 A number of revenue budgets remain within the Council’s accounts but are
delegated to Enfield Homes to manage. These are outlined below.
• Rents dwellings
• Contracts for services i.e. concierge, cctv and grounds maintenance
13. CAPITAL FINANCE AND PRUDENTIAL CODE 13.1 The Prudential Code for Capital Finance requires the authority to have regard to
affordability, prudence and sustainability when considering its capital investment plans and to set and keep under review a range of prudential indicators. The prudential indicators for the HRA are: - estimated capital financing charges as a percentage of net revenue stream - estimated capital expenditure - estimated capital financing requirement - incremental effect of capital investment decisions on housing rents.
13.2 The General Fund Budget report for 2010/11 elsewhere on the agenda sets out
the background to the prudential code and shows the indicators for the General Fund and the HRA.
13.3 In essence the Prudential regime gives scope for the HRA to borrow for capital
investment if the forecasts show that the resulting charges can be afforded over the medium to long term.
13.4 The 2010/11 Supported Capital Expenditure (SCE) for Housing is £4.797m,
interest payments on this figure are funded by way of Housing subsidy, and the current estimates and projections for the HRA include the revenue effects of borrowing to this level. In addition the HRA will fund the borrowing of £1m in 2010/11 for the Grants to Vacate programme and leaseholder buyback scheme.
13.5 £35m will be made available for 2010/11. The HRA will borrow this money in
addition to the £5.797m outlined above. Additional subsidy will be given to cover the cost of borrowing. The Prudential Indicators will be revised as a result of the additional funding received from CLG. No assumptions have been included about additional ALMO funding after 2010/11.
13.6 The Code, subject to an assessment of prudence, affordability and sustainability,
gives scope to borrow above current levels. This facility was reviewed as part of the business planning process during the year. Current business plan projections show that additional unsupported borrowing is not affordable.
13.7 Enfield Homes is preparing a capital programme for 2010/11 in line with currently
available resources. Projected Capital expenditure for 2009/10 is estimated to be £28.8m. The resources for 2010/11 total £53m.
14. HRA BALANCES AND RISK ASSESSMENT 14.1 The estimated position on balances at 1.04.10 is set out below. TABLE 4: HRA BALANCES AT 1/4/10
HRA Balances £m £m £m £m
Capital reserve
Repairs Reserve
General balances
Expected use of balances in 2009/10 4.20 (0.70) (2.26) 1.24
Estimated Balance at 1st April 2010 7.75 5.88 7.20 20.83
Expected use of balances 2010/11 (3.00) (1.00) (2.87) (7.11)
Estimated balance at 31.3.10 4.75 4.88 4.33 13.72
14.2 It must also be noted that balances cannot be used to sustain expenditure that is
too high over the medium to long term. They can be used as one off funding to support specific projects in the HRA. The capital reserve is to be used to fund major works programmes.
14.3 It was agreed in 2007/08 that over the following 3 years, inflationary increases in repairs and maintenance costs would be met from the Repairs Fund. £440k, was used in 2007/ 08 and a total of £1.2m in 2008/09. It was estimated that £1.6m would be used from the repairs fund in 2009/10. The use of the fund was reviewed during 2009/10. Recent projections show that only £700k will be used in 2009/10. It is planned to use £500k from the fund in 2010/11. This represents a considerable saving on previous year’s expenditure and is possible because of the increased capital programme including the decent homes work. In addition £500k will be earmarked for winter maintenance if necessary.
14.4 It is planned to use general balances to fund a number of initiatives during
2010/11. These are outlined below. TABLE 5 - HRA INITIATIVES
£ 000’s
Place shaping future projects 400 Sheltered Housing decants 40 Energy review 50 Review of service charges 40 North Circular Road funding for a rehousing officer 40 Increase in ALMO client resources (2yrs) 200
Ladderswood (cabinet report 25/11/09) 980 Highmead (cabinet report 16/12/09) 1,000 Total
2,750
14.5 Place Shaping future projects refer to the sustainability appraisal of the Council
housing estates currently underway to consider options to remodel estates and improve the viability of the HRA business plan.
14.6 It is anticipated that the energy review when completed will deliver savings on energy costs.
14.7 Service charges have not been reviewed for a number of years and this review
will look at caretaking and grounds maintenance charges. 14.8 The resources required for Ladderswood and Highmead are included in full in the
list above because the funds are already earmarked for these projects although not all expenditure will be in 2010/11, some will take place in future years.
14.9 NCR properties have transferred back to NCR and been sold to Notting Hill. An
additional post is required for one year for rehousing tenants in some of these properties.
14.10 It can be seen from paragraph 14.1, it is estimated that general balances at 1st
April 2010 will total £7.20m. The risks associated with this have been reviewed. It is considered prudent to retain balances at this level for 2010/11.
14.11 In addition to the above reserves, a bad debt provision of £1.5m existed at 31
March 2009. The adequacy of this amount will be reassessed at the end of the financial year to reflect the level of rent arrears.
14.12 As part of the budget process a risk assessment has been undertaken. The
detailed budget headings within the HRA were considered in terms of their risk factors (including the size of the budget, the degree to which it is demand led, its history of under or overspending and reliability of systems).
14.13 The areas of HRA expenditure identified as high risk are explained below. These
budgets will be subject to close monitoring throughout the year. 14.13.1 Repairs and maintenance - £15.444m
This is a large, demand led budget that needs close monitoring throughout the year particularly given the proposed savings in 2010/11.
14.13.2 Rents & service charges - dwellings – £52.127m
The risks associated with the rents budget lie in the size of this budget along with the complex current changes under the Rent Restructuring regime and the high level of voids.
14.13.3 Subsidy
There are possible changes to the subsidy budget because of the hand back of NCR properties and this will be closely monitored during 2010/11.
15. PROPOSED RENT CHARGES FOR 2010/11
15.1 It is recommended that the 2010/11 formula rents be increased in line with Government policy by 3.1% and that the rents for 2010/11 are set in accordance with Government’s policy. This calculation takes into account the negative RPI of 1.4%. This results in an average rent increase of 0.4% although because of rent restructuring and the need to move towards target rents there is a variation in
individual changes between -7.4% and + 3.1%. Rents should all be at formula by 2011/12 so will only increase by inflation in future years.
15.2 The formula rents regime sets upper limits on rents for different sized properties.
In 2010/11 the caps on weekly rents are as follows: TABLE 6 – CAPS ON WEEKLY RENTS
6–bed £152.01 5–bed £145.10 4–bed £138.20 3–bed £131.29 2–bed £124.37
1–bed & bedsits £117.47 15.3 In cases where the formula rent exceeds the cap level the formula rent is set at
the cap level and the actual rent will be moved in stages to the cap level. 15.4 If the charges for rents or services were to be varied, this would have to be met
by a contribution from balances.
15.5 Appendix 4 shows examples of the proposed rents for 2010/11 for different property types and sizes across the Borough.
16. PROPOSED SERVICE CHARGES FOR 2010/11
It is also recommended that the following service charges be made to those tenants in receipt of: TABLE 7 – PROPOSED SERVICE CHARGES 2010/11
Charge per week 2010/11
£ Caretaking level (1) (resident) 4.36 Caretaking level (2) (non resident) 2.67
Concierge 11.94 Grounds maintenance 1.05 CCTV 1.15 Heating fund (para 13.3) 0% increase
16.1 These charges aim to recover the full cost of the service. Caretaking and CCTV
charges have reduced to reflect the reduced cost of these services. There has been a small increase in concierge and grounds maintenance charges. In addition to the above, water and sewerage charges will continue to be collected through the rents on behalf of the water authorities.
16.2 Given the current energy review it is planned not to increase heating charges
pending the outcome of the review. Based on the current estimates for energy costs charges can be held at current levels. Some of the issues to be reviewed include tariffs, efficiency of heating systems and energy contracts.
16.3 There are no proposals at present to introduce new estate specific service charges, however Enfield Homes will be exploring this with tenants, in addition to any potential for changes to the concierge service.
16.4 The above charges have also been built in to the expected income from
leaseholders.
17. TEMPORARY ACCOMMODATION RENTS Proposed Temporary Accommodation (TA) rents for 2010/11 are attached at
Appendix 5. The rents have changed significantly since 2009/10 as the Department for Work and Pensions (DWP) has introduced new guidance to Local Authorities regarding rent setting for TA. As a result of this TA rents in London are now pegged to the Local Housing Allowance rate for the size of property less 10%, plus a flat rate management fee of £40 per week. Previously all rents apart from shared accommodation were set at £303.80 per week, irrespective of the size of the accommodation. This change now means that rents will be different, depending on the size of the accommodation. This change to the rents charged has resulted in a significant cost pressure, which is included in the main budget report elsewhere on the agenda.
18. ALTERNATIVE OPTIONS CONSIDERED Two alternatives were considered, these were not increasing rents in line with the
Government guideline and increasing rents above the guideline. Both these were discounted. If rents were not increased this would mean significant loss of income and could only be met from balances or from a reduction in services. To increase rents above the guideline was also discounted because this would result in a bigger rent increase than rent increase proposed by the government.
19. REASONS FOR RECOMMENDATIONS
In view of the implications of the alternatives mentioned in para 14, it is recommended to increase rents and service charges in line with Government guidance in order to maximise income and maintain service levels.
20. COMMENTS OF THE DIRECTOR OF FINANCE & CORPORATE RESOURCES AND OTHER DEPARTMENTS
20.1 Financial Implications
The Local Government Act 2003 requires the Chief Finance Officer to report on
the robustness of estimates and the adequacy of proposed financial reserves. The 2009/10 HRA estimates have been prepared taking into account the following:
• The estimated impact of inflationary pressures and pay awards. Allowance has been made for cost increases over and above the general rate of inflation where these are known;
• The estimated impact of increasing demands on resources where these are unavoidable;
• The estimated impact of underlying cost pressures, evidenced by financial monitoring reports in the current year; and
• An assessment of key risks and uncertainties. It is therefore the view of the Director of Finance and Corporate Resources that the HRA budget is robust and that the balances held are prudent. However, Members will note that a balanced HRA over the medium term is only achieved by assuming significant savings. The deteriorating financial position of the HRA is due to cost pressures on both repairs and management and the operation of the subsidy system. In addition the 2010/11 budget proposes to use one off resources from both the repairs fund and general reserves. Whilst this is possible in the short term, this is not sustainable in the medium term. Action is being taken to reduce costs and achieve savings necessary to maintain a balanced HRA. The HRA Business Plan has been revised and will be updated regularly.
20.2 Legal Implications Under the Housing Act 1985, as amended by section 162 of the Local Government and Housing Act 1989 a local authority is to decide on the rent they charge their tenants. Such charge must be reasonable for the tenancy or occupation of the house. The authority is required to review rents and make changes, as circumstances require. There is no methodology laid out for assessment of rents, but the law requires that the rent of houses of any class of description to bear broadly the same proportion to private sector rents. In addition, in preparing the budget for the HRA, all authorities are required to estimate as accurately as possible the total level of income that they need to raise from rents.
21. PERFORMANCE MANAGEMENT IMPLICATIONS
Setting a balanced budget for 2010/11 should enable the HRA performance targets to be met.
22. COMMUNITY IMPLICATIONS
Providing high quality housing continues to be a priority. Residents’ views were sought on the proposed budget as detailed under Putting Enfield First. Rents are set in line with Government guidance and an increase of 0.4% is low when compared to a number of other London boroughs.
23. PUTTING ENFIELD FIRST
In developing the rent proposals for 2010/11 a meeting was specifically arranged to seek resident’s views. In addition, officers attended Enfield Homes board. Enfield Homes continue to develop training for tenants on a wide range issues. This consultation and training is consistent with the vision of:
• Quality health and care services for vulnerable people in Enfield
• Supporting the delivery of excellent services
• Economically successful and socially inclusive
• Improving quality of life in Enfield
Sound medium term financial plans are essential to support the delivery of excellent services and the efficient use of resources across the organisation. The budget proposals set out in this paper will ensure that the Council’s limited capital and revenue resources are targeted on these key priorities
Background Papers Where Located Contact Resources Working Papers
4th Floor Civic Centre Fiona Peacock ext.5033
DCLG Subsidy and Item 8 Determinations
4th Floor Civic Centre Fiona Peacock ext. 5033
HRA Business Plan 4th Floor Civic Centre Fiona Peacock ext. 5033
APPENDIX 1 2009/10 BUDGET MONITORING – VARIATIONS (as at November 2009)
Budget Head Variation £’000 Supervision and Management
33
This is as a result of the recovery of £200k pay awards included in Enfield Homes Management Fee. This is reduced by overspend of £158k on the decant of sheltered units and an overspend on grounds maintenance due to additional tree works for health and safety. Enfield Homes is projecting to underspend the delegated budgets by £53k.
Rents non dwellings – shops/garages (223)
This is due to underspend on Aerials income offset by under recovery of income of £95k from commercial shops. This is due to high level of voids and as a result of the proposed demolition of Highmeads tower block
Interest on HRA balances
This is due to improvement in the investment interest rate. This increased from 0.25% to 0.477%.
(34)
Subsidy
(556)
The underspend is as a result of recovery of overpayment of negative subsidy to CLG relating to previous years. This is also due to changes to consolidated rate of interest.
Capital Financing
This is due to recalculation of capital financing charges and additional borrowing cost as a result of borrowings for Decent Homes.
362
Total
(418)
1. Hostel Licence Charges
1.1 There are 11 HRA hostel premises in Enfield providing 71 units of temporary accommodation. The rents for 2010/11 will range between £53.05 and £123.94 per week. This compares with the range in 2009/10 of between £52.40 per week and £126.74 per week. The average weekly increase is 1.81%. In addition, an amenity charge of up to £8.50 per week will also be levied.
1.2 On multiple occupancy hostels, the Department of Health & Adult Social Care
is responsible for payments of the Council Tax (CT). In these cases, an additional charge has to be added to the rental to represent the CT payment. The charge is calculated to ensure that the CT cost of each hostel is fully covered. The CT charge made to tenants is included for Housing Benefit purposes.
2. Garage Rents 2.1 There are 2 types of garages, which are let to Council tenants, leaseholders
and private tenants, wire cage (multi-storey block) and the standard lock-up. 2.2 A ‘non Council tenant premium’ is also charged on all lets to private tenants,
and any Council tenant or leaseholder who rents more than 2 garages. It is proposed that the rents be increased by 2%. The proposed charges for 2010/11 are:
2009/10 Weekly
Net Rent £
2010/11 Suggested
Net Rent £
Category (G0) Garages in multi-storey blocks 4.56 4.65
4. Communal Heating Charges 4.1 The Council has 1,788 properties in 71 blocks of flats serviced by communal
heating systems. The properties do not have individual metering. There are a mixture of electric, gas and oil fired systems but the charges for tenants (which are reviewed annually) are calculated on a pooled basis rather than on the cost of the fuel used by individual systems. Since 1996 leaseholders have been charged a proportion of the actual cost of the fuel used in their blocks, calculated on the basis of individual property rateable values.
4.2 it is proposed not to increase the heating charge in 2010-11. 5. Summary of Charges
2009/10 2010/11 £ £
Hostel licence charges 52.40 to 126.74 53.05 to 123.94 Garage rents
G1 Standard lock up Non Council Tenant Premium G0 Garages in multi-storey blocks
7.95 2.10 4.56
8.11 2.14 4.65
APPENDIX 3 ADMINISTRATION/MANAGEMENT CHARGE FOR LEASEHOLD UNITS 1. The administration and management charge is a flat rate added to the cost of
services to cover the preparation of estimates and actual costs, billing consultation on repairs and improvement works and estate management.
2. It is estimated that by 31 March 2010 a total of 4,559 flats will have been sold under
leasehold arrangements. 3. At the end of each financial year, the actual cost is determined and an appropriate
adjustment made to the charge. 4. The cost of administration and management for 2010/11 is estimated at £810k and
it is, therefore, recommended that the charge for 2010/11 be fixed at £178.38 per leasehold unit. This compares with the 2009/10 charge of £171 per leaseholder unit.
APPENDIX 4
3 94.96 95.98 104.88
4 106.27 106.96 111.95
2 83.13 83.05 84.75
2 78.16 77.37 77.32
Bedsits 64.54 65.03 68.56
The above are examples of the rents likely to be charged for specific properties. They are not necessarily typical, nor the maximum or minimum rents which will be charged. Service charges have been excluded, but will be payable in addition to the rent subject to the services provided to each property. The rent calculation is a function of the formula rent (using the CLG formula) and the existing 2009/10 net rent and is subject to various caps and limits.
APPENDIX 5 TEMPORARY ACCOMMODATION RENTS
Category Weekly rent 2009/10 Weekly rent 2010/11 £ £ Shared accommodation * 191.10 175.00 1 bedroom self contained 303.80 197.50 2 bedroom 303.80 247.00
3 bedroom 303.80 299.61 4 bedroom 303.80 377.50 5 bedroom and larger 303.80 496.92