Agenda item

Objective: This report sets out the interim Housing revenue Account (HRA) budget proposals for 2025/26 for consultation and the revised forecast for 2024/25. This report was presented to Cabinet on the 17 December 2024.

The Director of Finance and Assets introduced the report and explained that it showed the draft forecast position for the HRA in the current financial year. She noted that this reflected the financial information available in mid-November. The report also included the proposed budget for the HRA for 2025/26. She explained that this was produced in parallel with the General Fund budget and both were open for public consultation until 31 January. Once the consultation closes feedback from the committee, alongside the public and other stakeholders, will be included in the final budget proposal to Council on 21 February. This budget will then be used to populate the 30-year business model which reviews the long-term sustainability of the HRA and investment proposals.

The committee’s discussion raised the following points:

·         It is too early to understand the long-term impact of the reduction of the Right to Buy (RTB) discount. There was a significant increase in applications before the change came in on the 21 November. Whilst stock being removed from the HRA will see a reduction in dwelling rents the government is currently consulting on changes to legislation which would allow RTB receipts to be combined with different capital grants. This will hopefully provide more flexibility for funding of additional stock.

·         As of mid-November dwelling rents had decreased due to an increase in the number of voids. Revised figures will be provided in the February report to Council.

·         The decrease in income from services reflected the net impact of variances in both income and expenditure across the budget.

·         The budget for property improvements and major repairs has shifted, primarily due to delays in procurement. The final budget proposal will include re-profiling of the 4-year capital spend and will be driven by data coming out of the stock condition surveys.

·         We are not assuming that there will be any reimbursement of the increases to National Insurance (NI) contributions. The increase has been included within the budget proposals and is expected to be around £200k for current housing staff.

·         The forecast operational surplus is expected to be lower than previous years, primarily due to the increase in NI contributions and a forecasted average borrowing cost of 4.35%, which will lead to an increase in expenditure which will be higher than the permitted rent increase.

·         Historically the target reserve for the HRA has been £1.5m but has been lower in recent years. There is also a separate CBH reserve which is not included within these figures that can be accessed if needed and will be transferred to the HRA reserve when the company is wound down.

·         Once the final numbers have been confirmed they will be put through the 30-year model and reviewed with relevant groups. The model doesn’t just track balances and reserves but uses a large number of financial measures, including interest cover and borrowing, to assess the health of the HRA over the long-term.