Agenda item

Report of the Corporate Director (Community Services) and Head of Financial Services.

(Cabinet Member with Special Responsibility Councillor Kerr)

The Corporate Director (Community Services) and Head of Financial Services submitted a joint report updating Cabinet on the recent changes that Government introduced regarding the Housing Revenue Account (HRA) subsidy arrangements for 2009/10, and the associated implications and options for councils housing rents for the current year.

The options, options analysis, including risk assessment, were set out in the report as follows:

The Council has two options:

(1)               Do nothing; i.e. leave council housing rent levels as they are.

(2)               Reduce the average annual council housing rent increase for 2009/10 from 5% to 3.05%, resulting in an average rent of £58.45 over the year, and implement as set out in the report, with the associated updates to the revenue budget.

The advantages of the ‘do nothing’ option are that there would be no additional administrative burden to either Council Housing (new rent letters and additional IT system changes) or the Housing Benefits section (retrospective benefit entitlement changes). The main disadvantages are that tenants have been asked to pay rent increases substantially higher than the level of inflation and there is a general expectancy, after the Government’s recent announcements, that rent increases will be lowered; ‘doing nothing’ would not meet these expectations.  Also, under this option the Council would lose the opportunity to benefit from the associated increase in subsidy.  In the circumstances, it would be difficult to justify keeping the rent increase at 5%.

In terms of the option for changing rent levels, whilst there would be additional administrative work generated as a result and potential difficulties in communicating effectively the associated implications for tenants, overall, financially, both tenants and the City Council would gain from the proposals in the current year.  As the whole year reduction will be condensed and applied in total to the remaining 32 weeks of the year, the advantage to the tenant is in the real reduction of rent by an average £1.66 per week. This amounts to a 2.79% reduction in average rent (from £59.56 to £57.90) for the 32-week period.

That said, it is not known whether there would be any implications for future years – this would be dependent on Government’s future proposals and the outcome of its much wider review of the housing subsidy system.  It should be noted, however, that for 2010/11, it would be expected that any rent increase would be calculated on the revised year average rent of £58.45, and not the condensed average of £57.90.  This could create difficulties in tenants’ future perceptions.

There is, therefore, some risk attached regarding future years, but any financial implications cannot really be measured as yet.  Cabinet should note that this proposal focuses only on rents for 2009/10 – future years’ prospects and targets would be picked up as part of the next budget process.

The Officer preferred Option is Option 2 – to reduce the average annual council housing rent increase for 2009/10 from 5% to 3.05%, resulting in an average rent of £58.45 over the year, and implement as set out in the report, with the associated updates to the revenue budget.

It was moved by Councillor Kerr and seconded by Councillor Bryning:-

“That the recommendations, as set out in the report, be approved.”

Members then voted:-

Resolved unanimously:

(1)               That the average annual council housing rent increase for 2009/10 be reduced from 5% to 3.05%, resulting in an average rent of £58.45 over the year.

(2)               That in line with the above, weekly average rents payable be reduced accordingly with effect from 03 August 2009, or as soon as possible thereafter, subject to any implications arising from receiving the final rent determination from Government.

(3)               That the 2009/10 revenue budgets for the Housing Revenue Account be updated accordingly, as set out in the report.

Officers responsible for effecting the decision:

Corporate Director (Community Services)

Head of Financial Services

Reasons for making the decision:

This decision will lower rent increases, in line with tenants’ expectations, whilst giving the Council the opportunity to benefit from the associated increase in subsidy.