Agenda item

The Director of Housing submits a report setting out the proposed Housing Revenue Account (HRA) budget (including Capital Programme) for 2022/23, which will be considered by Council on 23 February 2022. An extract from the meeting of the Housing Scrutiny Commission on 10 January 2022 is attached.

The Overview Select Committee is recommended to make any comments on the report, in particular the proposal for delivering a balanced budget and the proposed rent increase.

The Director of Housing submitted a report which set out the proposed Housing Revenue Account (HRA) budget (including Capital Programme) for 2022/23, which would be considered by Council on 23 February 2022. An extract from the meeting of the Housing Scrutiny Commission on 10 January 2022 was also considered.

The Overview Select Committee was recommended to make any comments on the report, in particular the proposal for delivering a balanced budget and the proposed rent increase.

The Director of Housing delivered a presentation (attached for information) which picked out highlights from the report and additional pertinent information:

·         The Housing Revenue Account Budget was made up of income from council tenant rents and service charges. The money was used to provide the repairs service, fund the work of the Income Management Team, the Housing Officers and the STAR service. It was also used to invest in stock through the Capital Programme and to make improvements to the environment of the Council’s estates.

·         The investment made into properties, and that planned for the future, ensured all council homes were of high quality, compared with other tenure types in the city, and the wide range of services provided demonstrated the Council was one of the best landlords in the city.

·         The HRA had faced financial challenges, with reducing income levels over time. It was reported that since 1981 the Council had lost in the region of 17,000 properties through Right to Buy (RtB). If those properties were still held in the Housing Revenue Account, then there would be an additional £63m of income each year.

·         Additional financial pressures were felt between 2016 and 2020 by the government requirement that rents be reduced by 1% each year. Whilst tenants benefited from a reduction in their weekly rent during this period it led to an overall loss of income to the Housing Revenue Account of £3.1m per year.

·         The continuing financial pressures, such as a rise in employee costs, were taken into account when drawing up proposals for the HRA budget for 2022/23, and difficult decisions had been made to ensure there was money to continue to provide services that were a priority for tenants.

·         The Council would do everything it could to protect tenants and had therefore chosen not to charge rents which exceeded Local Housing Allowance rates and meant that tenants would never be charged more than the benefits they received for housing, for those on full Housing Benefit or those who had all their housing costs covered by Universal Credit (UC).

·         There was a proposed 4.1% increase in core rents, with on average tenants paying just over £3 more rent a week. It was known that about 50% of tenants were on full housing benefit or had their full housing costs covered by UC. For these households the increased rent would be covered by their benefit entitlement in full.

·         The Council had a long history of providing support to tenants who faced financial difficulties, much more than was in place for people in other tenure types. Support would continue, particularly for those who were adversely impacted upon by the proposed rent increase. The HRA funded the Income Management Team which was there to support tenants in financial difficulties. Housing Officers also carried out welfare visits to vulnerable council tenants, and the STAR service provided support to tenants with more complex needs, where financial difficulties may be just one issue that required support. Those services brought in over £2m additional income for tenants.

·         Slides provided comparison of average rents for council tenure and the private sector in Leicester, comparator authorities, and other East Midland authorities, and showed Leicester City was amongst the lowest rents.

·         Whilst garage rents were set separately to dwelling rents it was proposed to increase those in line with the core rental increase at 4.1%.

·         Service charges should be set with the intention of recovering the full cost of providing the service. Currently, tenants and leaseholders were benefitting from charges which were set below the cost of delivery, and it was proposed to increase service charges by 2% with the impact on tenants and leaseholders being dependent on what additional services and improvements they had received in their home. Also, the majority of service charges were covered by Housing Benefit and UC, for those that received the full entitlement.

·         Hostel rents and service charges were calculated to ensure that expenditure was fully re-couped. Costs for the service were expected to increase by 2.5% in 2022/23 so an equivalent increase in rents and service charges was proposed.

·         For District heating the proposed increase was 7.29% to cover massive increases in wholesale energy prices, which was on average £1 more per week.

·         Feedback from tenant representatives was contained in Appendix G of the report. They were supportive of the proposed rent increases for garage rents and service charges and thought that garage rents could possibly be increased more than was proposed. They also thought overall the proposed increase in the district heating charge was fair.

·         Some tenant representatives did had some concerns over the level of the proposed core rent increase and would prefer to see a lower rent increase. However, it was made very clear by the tenant representatives that they absolutely did not wish to see any cuts in the Housing services provided or investment being made to Council housing and the estates.

·         In terms of the next steps the final decision on the Housing Revenue Account budget for 2022 / 23 would be made at the Full Council meeting on the 23 February 2022.

Councillor Westley, Chair of Housing Scrutiny Commission (SC), reported the HRA had been considered at the last Commission meeting on 10 January and had fully supported the proposals. He stated the HRA was a huge single figure in the council’s budget and for that reason alone needed to be considered carefully.

It was reported that during consultations on the budget a question had been asked ‘Your suggested rent increase would cut more than £750,000 from the budget. What would you cut?’ It was noted that no cuts in budget were suggested, but there were plenty of ideas for increased spending, for example, on safety and security, environmental works, increased staffing, and further house building. He believed the responses from tenants and leaseholders indicated no-one felt there was waste or inefficiency within the budget and echoed the sentiment, which was supported by further information from within and outside the city.

The Chair of Housing SC also noted the Council’s rents were cheaper by a significant amount than housing association rents within the city, and a lot cheaper than private sector rents, and cheaper than the vast majority of similar authorities around the country. He added that being cheap was not by itself an advantage or a virtue, as the Council had to deliver effective services and programmes for the thousands of families who lived in our rented homes across the city.

It was reported that some of the most vulnerable people on the lowest incomes were council tenants and would find they were being affected by cuts in UC and other benefits. The Chair of SC stressed that moving forward to support the many that were living on the breadline, he wanted to see a hardship fund created, that would incrementally rise year on year as need arose, for example, those not on UC and working, but were still on the breadline through the rise in the cost of living and heating bills.

The Chair of Housing SC continued that the HRA supported teams which helped those vulnerable people directly, and the proof was in how few evictions had been imposed, but where there were evictions, they had overwhelmingly been caused by antisocial behaviour issues or refusal to make contact with officers trying to help them. He added that the Housing department worked with, not against, council tenants, helped create and support communities across the city, and helped to create and sustain jobs.

The Chair of Housing SC reported that the points made were the views set out at the Housing SC meeting, and he was pleased to report that Members had unanimously supported the HRA budget proposals and that he hoped the Overview Select Committee reinforced the view. He additionally paid tribute to the Council’s enforcement team who work tirelessly to keep people in their homes with food on the table.

Councillor Porter commented that with regards to waste and inefficiency, the number of void properties being left empty had lost the Council in excess of £1million in rent. He added that with the 4.1% increase in rent, 50% of people would be impacted in the midst of a cost-of-living crisis, with increased fuel bills, Council Tax increases, and people were having to make some very difficult decisions.

Councillor Porter made further reference to the call-in of an executive decision (Acquisition of Property Portfolio for Affordable Housing) at the meeting of the OSC on 16^th December 2021, and to page 50, Appendix D to the report, whereby it cost on average £96.69 for a bedsit in the private sector and £57.64 for a council bedsit which was 40% lower than the private sector. He noted it cost £97.51 to rent a four-bedroom council property and that the council would be better spending money on building new property rather than purchasing bedsits, to provide housing for families.

Councillor Gee, responded that as a Member of the Housing SC, it had been discussed that 50% of tenants would be on full UC, with 20% on partial housing benefit who would pay slightly more in rent, and the remainder did not receive benefits. He added council tenants wanted to be kept to good standard and upgraded, but unfortunately they could see nothing in the budget that could be cut. He added that there were property voids and loss of income during the pandemic but had been unavoidable as subcontractors had been furloughed, but voids were almost back to normal levels. The Director of Housing confirmed it had been challenging and at one point, only one worker at a time had been allowed into properties, but contractors were now being utilised as capacity increased in order to bring more voids into use. It was noted the rental loss would show slightly higher this year, but the mitigating reasons behind it were understood by many people.

The Director of Housing responded that with regards to the 50% of people of tenants that would be affected by the rent increase, 20% would get a proportion of the increase covered. He added that the 30% of the tenancies not on benefits and who might struggle with the increase of £3 per week would receive support from a number of teams. He added that, whilst it was not a pleasant increase, he was reassured the Council had those teams to work closely with people who might struggle during the current economic climate to enable them to manage. He noted the Income Management Team had done a very good job over the years to support people economically, and nobody had been evicted during the last year, and there had only been seven incidents of evictions due to rent arrears, which was put down to non-engagement with officers and support offered to them. It was explained that as soon as someone went into arrears, assistance was offered to help them manage their finances, for example, to spread out arrears, to help them apply for the discretionary rent relief fund and council tax discretionary relief scheme, the Income Management Team had brought in over £500k in additional income for people, to help people cope with challenges. It was also reported the STAR team had brought in over £1m to assist people struggling.

The Director referred to the purchase of units discussed at the previous meeting, which would generate an additional £1.4m income into the HRA back into the account. He had also stated that whilst there was a need for family homes, there was also a need for bedsits and one-bedroom flats to support the ‘Everyone In’ initiative.

The Chair stated there had been good debate and welcomed the views of the Housing SC because it was very clear that Members had looked at the budget thoroughly.

He proposed that the recommendations in the report be endorsed for Full Council. Members agreed with the proposal. Councillor Porter asked that his decision against the proposed recommendations be noted.

AGREED:

1.    That the report be noted.

2.      The recommendations be endorsed for Full Council.