New Prospect Housing Limited
New Prospect Housing Limited
Included in the revenue budget is the management fee paid to New Prospect Housing Limited (NPHL), to be considered the council in March 2008. NPHL is an arms length management company established by the city council from 16 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 2008/09 management fee has been developed on the basis that New Prospect will continue with its present structures up to the proposed date of transfer to City West in July 2008. 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.
NPHL will be responsible for repairs in the west of Salford up to the date of transfer. They have been working with Salix Homes to establish a split of the budget between the West Salford and central Salford areas which does not have a detrimental impact on services. As such NPHL are being asked to manage a net repairs budget of £4.3m.
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. In 2007/08 the Government extended the length of time it will give local authorities to complete the transition from old rent to new rent. The new deadline for completion of change is 2016/17.
The council has 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 £2.91 per week (based on 52 weeks which is equivalent to £3.15 per week over 48 weeks due to rent free weeks) for 2008/09.
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 £2.7 million in 2008/09.
For 2008/09 the date of the transfer of stock has a major implication in relation to the amount of subsidy received compared to the loan interest paid. Loans are charged to the HRA based on the average stock levels held at the mid-year point whereas subsidy is paid based on when stock actually changes. This effectively means that based on the scheduled July transfer date the HRA is charged for two months to the mid year point for stock on which it will not receive subsidy. This equates to approximately a £1 million shortfall on the HRA in 2008/09.
HRA Reserves
The Housing Revenue Account is required to maintain financial reserves to meet unforeseen circumstances that might arise. In an ideal situation reserves associated with an account of this size taking account of the volatile nature of the HRA would amount to approximately 3% of the gross budget equating to £1.6 million. This is the level of reserves recommended by the Audit Commission.
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 £1.3 million is required.
The following table indicates that at the 31st March 2009 reserves are expected to be nil.
| Estimated balances | millions of pounds |
|---|---|
| Acutal reserves at 31 March 2007 | 3.3 |
| Less use in 2007/08 for the stock options appraisal costs | -1.7 |
| Anticipated reserves 31 March 2008 | 1.6 |
| Less proposed use in 2008/09 | |
| Costs associated with the stock options appraisal process | -0.6 |
| Difference in loan charges to subsidy loss | -1.0 |
| Estimated reserves as at 31 March 2009 | 0.0 |
Although this would normally be an unacceptable level of reserves it has always been accepted that 2008/09 was going to be a difficult year financially because of the transition to City West and the need to draw down a substantial amount of external investment to make homes decent. Consequently the important point is the future strategy to restore balances to a more prudent level and this will be developed as part of the HRA business plan to be updated shortly.
Housing Achievements 2007/08 and Plans 2008/09
This page was last updated on 19 March 2008
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