The Housing Revenue Account
The 2007/08 revenue budget
From 1st April 1990 it became a statutory requirement for local authorities to maintain a separate ‘ring-fenced’ account, known as the housing revenue account (HRA) which sets out the expenditure and income relating to the provision, supervision and management of council housing, flats and accommodation.
Under the ‘ring-fencing’ arrangements the council cannot call upon the general fund or council tax related services to subsidise any losses that may be incurred by the HRA. Therefore, the costs of this service do not have any impact on the council tax you pay.
A financial summary of the Housing Revenue Account 2006/07 and 2007/08 is given below:
|
2006/07 Latest Forecast £m |
2007/08 Budget £m |
|
|---|---|---|
| Expenditure | ||
| - Strategy | 1.200 | 1.200 |
| - Stock Options | 3.861 | 4.729 |
| - NPHL management fee | 18.319 | 18.316 |
| - NPHL management fee repairs element | 2.763 | 2.976 |
| - Housing repairs | 21.300 | 21.000 |
| - Major repairs allowance | 16.270 | 16.208 |
| - Financing costs - loan charges, interest, etc. | 17.510 | 17.698 |
| - Other expenditure | 6.961 | 7.176 |
| 88.184 | 89.303 | |
| Funded by: | ||
| Housing rents and associated income | 68.141 | 69.858 |
| Other income | 8.320 | 9.013 |
| Government subsidy | 10.606 | 8.820 |
| Interest receivable | 0.165 | 0.150 |
| Contribution from balances | 0.952 | 1.462 |
| 88.184 | 89.303 |
Decent Homes Standard and Stock Options
The Government has told all councils in the country to ensure that their homes are up to the Decent Homes Standard. Although the Decent Homes Standard is fairly basic, approximately 50% of council homes in Salford do not currently meet this standard never mind the higher standard that Salford people want to see – the Salford Standard.
Financing the improvement works required to meet the Salford Standard for council owned homes from the council’s budget was not possible for Salford. Like many other local authorities, the council does not have the funding needed to bring all of its council housing up to standard. Therefore the council undertook a housing options review and have produced a Decent Homes Investment Strategy which has taken into account the opinions and aspirations of our tenants.
The plans provide for the use of a variety of our investment options, which provide for different solutions for the various parts of the city. These involve the transfer of stock to a newly formed local housing company, the creation of a new arms length management company and the private finance initiative. The plans are currently in progress and more details are available on our website at www.salford.gov.uk/housing-options-review.
The stock options appraisal process has required the secondment of staff from housing, New Prospect Housing Limited, finance, legal and personnel, plus specialist consultants for finance, legal, tenant consultation, stock condition surveys and marketing. Whilst some of these costs will be covered from the existing budget there will be a need for a contribution from balances of £0.952m in 2006/07 and £1.462m in 2007/08. The impact of these requirements on the level of reserves is shown in note 8 below.
New Prospect Housing Limited
Included in the above costs is the management fee paid to New Prospect Housing Limited (NPHL), agreed by the city council in February 2007. NPHL is an arms length management company established by the city council from 16th September 2002, to manage and maintain its council housing stock. NPHL is a special type of non-profit making company, which is fully owned by the council but operates independently. The company runs a partnership between the city council and council tenants.
The 2007/08 management fee has been developed on the basis that New Prospect will continue with its present structures for a full financial year. This will ensure that the monthly management fee is at an appropriate level for the first few months of the financial year to allow operations and service to be maintained. However, as Salix Homes and Housing Connections Partnerships are due to be launched in June 2007 as part of the stock options mentioned in note 2 above, the management fee will be amended to reflect the transfer of services to the new organisations. The reduced fee to New Prospect will reflect the cost of interim service provision to west Salford prior to the launch of City West Housing Trust.
Housing repairs
The council operates a housing repairs account which is used to keep a separate record of income and expenditure relating to the repair and maintenance of an authority’s council dwellings or other housing revenue account properties. The main item of income within this account is the contribution from the housing revenue account comprising in 2007/08 of a repairs element of £21m and an element of the NPHL management fee of £2.9m.
Major repairs allowance
The major repairs allowance referred to in the budget summary was introduced in 2001/02 under government legislation and it represents the estimated long term average amount of capital spending required to maintain the housing stock in its current condition.
Rent restructuring
Under government proposals on rent restructuring rents should reflect more closely the qualities that tenants value in properties, and that there should be no unwarranted differences between the rents set on similar properties by different local authorities or registered social landlords (RSLs). Rents are to be based on the size, condition and location of the property and the level of local earnings. The government wants the transition from old rent to new rent to be completed within ten years ending 2012.
The city council have approved a rent restructuring plan which provides for all property rents to be recalculated and modelled over the remaining transition period in line with government recommendations. Within this plan the council has approved an average rent increase of £2.58 per week (based on 52 weeks which is equivalent to £2.80 per week over 48 weeks due to rent free weeks) for 2007/08.
Housing Subsidy
This is a government grant paid to some housing authorities like the council to subsidise the costs of providing, managing and maintaining dwellings. The subsidy is calculated by reference to estimated costs based largely on the government’s assessment of both expenditure and income using a guideline average rent. Under these arrangements the council are budgeting to receive £8.8m in 2007/08.
HRA Reserves
The housing revenue account is required to maintain financial reserves to meet unforeseen circumstances that might arise. A formal risk assessment exercise has been undertaken similar to that used for the general fund to review risks in relation to reserves. This indicates that a level of reserves of approximately £1.4m is required.
Actual reserves at 31st March 2007 are shown below and indicate that they are expected to be £1.379m, which is in line with the balance required to cover the possible major risks as summarised in the above assessment.
A statement of estimated balances held by the housing revenue account is shown below:
Although the level of reserves is slightly below the recommended amount this is justified through the investment required to fund the implementation costs of stock options.
Housing priorities and achievements
The council operates a housing strategy with the purpose of presenting a comprehensive picture of local housing needs, issues and priorities. The strategy confirms our plans for housing over the next two years as well as the plans and actions we intend to carry out to help realise our vision for housing in the city. A copy of this document is shown at: www.salford.gov.uk/housingstrategy. Details of the achievements in 2006/07 and plans for 2007/08 are given below:
2006/7 Achievements in Housing
Pledge 1 – Improving Health IN Salford
- Continued to deliver a housing advice and support strategy which ensured that homeless and vulnerable households had access to health services while in temporary accommodation and access to appropriate support services to live independently in a permanent home.
- Tackled unfit homes and improved energy efficiency (and warmth) which improved the health and well-being of residents
- Continued investment in disabled adaptations work enabled people with a disability to remain in their homes.
Pledge 2 – Reducing Crime IN Salford
- Began the phased implementation of licensing within Langworthy and the mandatory licensing of certain houses in multiple occupation across the city. Licensing have ensured that landlords covered by the scheme were fit and proper persons through Criminal Record Bureau (CRB) checks, had proper tenancy management arrangements in place and made it a condition of a license that, where relevant, landlords took reasonable steps to control the antisocial behaviour of their tenants. Throughout the year we worked closely with landlords to assist them into the new licensing regime and to take action where breaches of license conditions occurred
- Developed the coordination of housing policies to reduce re-offending. Access to accommodation was highlighted as a barrier in the effective management of offenders; from advice services on sentencing through to effective re-settlement and release. There was also active multi agency involvement and arrangement of housing and support to prolific and persistent, high risk or nuisance offenders was further developed.
Pledge 5 – Promoting Inclusion IN Salford
- Developed a tenants and residents compact called “Opening Doors” this details how consultation will take place and how it will be monitored and reported. The compact has been developed with tenants and residents and was launched in spring and implemented throughout the city during 2006/2007
- Produced a new cross tenure Tenant Participation compact in 2006 which sets out how we will engage residents and tenants.
Pledge 7 – Enhancing Life IN Salford
- Carried out a stock options appraisal process which has been one of the largest in the country. This has involved detailed consultation with tenants and residents. In May 2005 the housing options steering group made up of tenants, councillors and the independent tenant advisor made recommendations to the council for a mixed solution approach to investment in council housing. The options recommended are as follows:
| ALMO | PFI | Local Housing Company |
|---|---|---|
| Central Salford Regeneration ARea | Pendleton | Barton, Eccles & Winton |
| Ordsall | Swinton & Pendlebury | |
| Beechfarm | Little Hulton, Walkden & Worsley | |
| Cadishead & Irlam |
- Due to the complexity of implementing a mixed solution model, substantial change needs to take place in order to position both New Prospect and the council to implement the options. These options should be implemented by summer 2008
- Submitted a bid for PFI of £102m which has cumulated in the council being requested by the DCLG to submit an outline business case during 2007/08
- Submitted a bid of £98m for transfer gap funding to allow the local housing company to be established and draw down the funds for the Decent Homes programme. The council has been accepted onto the transfer programme and details of the amount of the valuation need to be progressed
- Submitted a bid of £69m for ALMO funding as part of round six and whilst announcements are still awaited the launch of the ALMO is still being progressed
- Developed business plans for the establishment of a common services provider to provide residents of Salford with a single point of contact irrespective of tenure for certain housing services. These plans have been developed in conjunction with those for the ALMO, transfer and strategic housing services
- Considered the implications of the new organisations on the residual HRA, housing general fund and city council
- We will have been inspected on our Supporting People programme by the end of the financial year but the results of this will not be known at the time of this report
Key Housing Plans against Pledges 2007/08
Pledge 2 – Reducing Crime IN Salford
- Through the establishment of the common services provider for services such as burglary reduction and anti social behaviour we will have a co-ordinated approach to help reduce crime
- Through the planning of the investment works to be delivered through the new organisations we will ensure that designs take into account factors to mitigate crime and the involvement of neighbourhood management.
Pledge 7 – Enhancing Life IN Salford
- Launch Salix Homes in June 2007 as a regeneration ALMO for Central Salford and continue to work with the DCLG to be placed on the round six programme
- Work with the management team and Board of Salix to ensure that when the inspection takes place it will achieve two stars in order to draw down the ALMO funding
- Work with Salix, Central Salford URC, HMRF Pathfinder Board, NDC Board and private sector partners such as Countryside and Legendary Properties to ensure a coordinated approach to regeneration in the area
- Launch housing connections partnerships (CSP) in June 2007
- Work with the DCLG on the transfer programme and the shadow Board of City West Housing Trust in preparation for its’ launch in April 2008
- Prepare and submit an outline business case for PFI by December 2007 to DCLG
- We will work with the board and management team of New Prospect to ensure there is no change to services provided to tenants during transition and also on the winding down of New Prospect
- Work with the council to consider the implication of the changes on other directorates and the HRA
- Work with Human Resources at all stages of the changes to ensure that the welfare and well being of both council and New Prospect staff are duly considered
- The Supporting People programme will continue to provide specialist accommodation for vulnerable residents during 2007/08
This page was last updated on 28 February 2008
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