HRA Rent and Budget Setting 2020/21 - Lambeth Council
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HRA Rent and Budget Setting
2020/21
1
The Housing Revenue Account
• All Lambeth council tenant rents are paid into the Housing
Revenue Account (HRA). This is a ring fenced account
specifically spent on housing services such as repairs and
maintenance, major works including the Lambeth Housing
Standard (LHS) and fire safety works and improvements
• When the current HRA self-financing model was set up it
required the council to take on approximately £170m in debt
and develop a 30 year business model
• Proposals for this budget setting year continue to be driven by
the financial planning that underpins the model to deliver
services and capital investment
2HRA Current Pressures: The Rent Cap
• The Government have enforced a rent reduction of 1%
each year over the past four years (2016/17 – 2019/20)
which we are now at the end of
• This reduction has reduced funding by £28.5m over that
period and left a baseline funding gap of £11.5m per year
which means that over the 30 years of the business plan
period the HRA will have £325m less resources available
to it
• This is a problem that has impacted on all London
boroughs and many are facing similar long term funding
shortfalls
3HRA Current Pressures: Fire Safety Work
• The Council has built in a capital budget of approximately
£10m in 2019/20 for fire safety work
• There is an ongoing programme of £5m per year for four
years (2019/20 – 2022/23) to ensure that residents’ front
entrance doors to their flats are fully compliant with fire
safety standards and an additional £2m per year for
preventative fire safety works annually
• These budgets are on top of what has previously been
spent on testing cladding to ensure that our buildings did
not have the same type as that used in Grenfell
4Lambeth Housing Standard
• To date 31,466 tenanted and leasehold properties have
been brought up to LHS standard.
• £35m capital expenditure expected in the current year,
with a further £35m expected in 2020/21.
• This requires careful management of the finances to
ensure there is adequate funding to support the
programme whilst maintaining sufficient reserves
• The works have meant more tenants benefitting from
major capital investment to their homes
5Setting The Rents: Rent Policy
• When the HRA business plan was first created it was built on
the assumption that rents would increase annually at the
maximum allowable rate, (initially RPI + 0.5% but subsequently
amended to the lower rate of CPI + 1%)
• The increase in rents was to allow the HRA to support
increasing annual costs resulting from inflationary uplifts in both
management and repairs spend and additional debt
management expenses arising from the additional borrowing
required to deliver the LHS programme and other capital works
and then maintain the stock at that level
• Whilst the model was built to cover a 30-year period, tenants
are consulted annually regarding the rent increase
6Setting The Rents: Rent Policy
• Following the Summer 2015 budget there was an enforced rent
reduction of 1% per year for the four years 2016/17 – 2019/20
creating the previously mentioned budget pressures in the HRA
that have been met by delivering savings against management
costs and through generating efficiencies
• Now that the rent reduction period has come to an end, the
Government has confirmed that from 2020/21 rents can once
again be increased at the rate of CPI + 1% in line with the
policy before the rent reduction was introduced.
7Setting The Rents: Rent Proposal
• It is proposed that the rents for 2020/21 will be increased by
CPI + 1%
• CPI is 1.7% as of September 2019, so this would mean an
increase in rents of 2.7% and would increase the rental income
to the HRA by £3.5m per year and by doing so would allow
services to be maintained at the current level without further
savings being required
• Not increasing the rents by this amount and leaving them at
2019/20 levels would mean that income would not keep pace
with rising costs and would mean a further loss of £105.7m
over the 30 years of the business plan
8Impact – 2.7% Increase
Bedrooms % of dwelling Avg weekly rent Avg weekly rent Average % Increase
stock 2019/20 2020/21 Increase
Studio 3.7% £76.73 £78.80 £2.07 2.7%
1 Bed 27.9% £90.62 £93.07 £2.45 2.7%
2 Bed 34.9% £103.48 £106.27 £2.79 2.7%
3 Bed 26.5% £119.11 £122.32 £3.22 2.7%
4 Bed 5.6% £137.76 £141.48 £3.72 2.7%
5 Bed 1.0% £150.27 £154.33 £4.06 2.7%
Over 5 Bed 0.4% £167.59 £172.11 £5.51 2.7%
9Service Charges
• Service charges are set on the basis of recovering the
estimated cost of providing the service
• Service charges are based on the last full year of costs
incurred, (2018/19 in this case) with an allowance for
inflation for the two subsequent years
• Service charges are made up of two main elements –
costs directly incurred by the Council in providing the
service and allowances paid to Tenant Management
Organisations (TMO’s) in providing the service
10Service Charges
• Overall in 2020/21 there is an increase in the
common service charges of £1.90 per week,
largely as a result of some undercharging in
2019/20, an increase of 17pence per week in
heating and hot water charges and an overall
decrease of 7pence per week for specific charges
• Garage and shed charges remain unchanged
11Service Charges Proposal
Service Charge 2019/20 2020/21 Movement
(per week) (per week)
Common service charges
Caretaking £1.34 £1.56 £0.22
Grounds Maintenance £1.25 £1.35 £0.10
Estate Cleaning £5.71 £6.74 £1.03
Communal Lighting £2.48 £3.06 £0.58
Disinfestation £0.74 £0.71 (£0.03)
Total £11.52 £13.42 £1.90
Heating and Hot Water (Average) £10.35 £10.52 £0.17
12Service Charges Proposal (cont’d)
Service Charge 2018/19 2019/20 Movement
(per week) (per week)
Specific service charges
TV Aerial £0.13 £0.15 £0.02
Concierge £16.56 £17.25 £0.69
CCTV £2.74 £2.49 (£0.25)
Door Entry – Audio £2.23 £1.93 (£0.30)
Door Entry – Video £3.19 £2.96 (£0.23)
Total £24.85 £24.78 (£0.07)
13Garages & Sheds – Charges Proposal
Service Charge 2019/20 2020/21 Movement
(per week) (per week)
Garages
Category A – Tenants £19.00 £19.00 £0.00
Category B – Resident
Leaseholders £22.50 £22.50 £0.00
Category C – Non-Residents £36.00 £36.00 £0.00
Category D – Blue Badge Holders £0.00 £0.00 N/A
Category E – Council Interest £0.00 - £0.00 -
Dispensations* £36.00** £36.00** £0.00
Sheds
General £3.00 £3.00 £0.00
* Garages that are currently let for either community use or under special arrangements due to non-uniform size
**Level of charge to be agreed by Director of Housing Services
14Comparison of Service Charges
Service Charge 2017/18 2018/19 2019/20 2020/21
Charge Charge Charge Charge
(per week) (per week) (per week) (per week)
Common service charges
Caretaking £1.27 £0.94 £1.34 £1.56
Grounds Maintenance £1.38 £1.39 £1.25 £1.35
Estate Cleaning £6.40 £6.34 £5.71 £6.74
Communal Lighting £2.85 £2.94 £2.48 £3.06
Disinfestation £0.77 £0.76 £0.74 £0.71
Total £12.67 £12.37 £11.52 £13.42
Heating and Hot Water (Average) £11.01 £10.47 £10.35 £10.52
15Comparison of Service Charges
Service Charge 2017/18 2018/19 2019/20 2020/21
Charge Charge Charge Charge
(per week) (per week) (per week) (per week)
Specific service charges
TV Aerial £0.26 £0.23 £0.13 £0.15
Concierge £18.53 £18.03 £16.56 £17.25
CCTV £2.42 £2.44 £2.74 £2.49
Door Entry – Audio £1.53 £1.55 £2.23 £1.93
Door Entry – Video £2.32 £2.34 £3.19 £2.96
Total £25.06 £24.59 £24.85 £24.78
16Comparison of Service Charges
Service Charges (per week) 2017/18 2018/19 2019/20 2020/21
Garages
Category A – Tenants £12.23 £19.00 £19.00 £19.00
Category B – Resident
Leaseholders £12.23 £22.50 £22.50 £22.50
Category C – Non-Residents £30.00 £36.00 £36.00 £36.00
Category D – Blue Badge Holders £0.00 £0.00 £0.00 £0.00
Category E – Council Interest £0.00 - £0.00 - £0.00 -
Dispensations* £0.00 £36.00 £36.00 £36.00
Sheds
General £1.00 £3.00 £3.00 £3.00
17Income: pence per £1 2020/21
18Expenditure: pence per £1 2020/21
19Comparison of Income: Pence per Pound
Income 2019/20 2020/21
Dwelling Rents 78p 79p
Tenants Service Charges 8p 8p
Leaseholder Service Charges 7p 7p
Non Dwelling Income 3p 2p
Interest & Other Income 3p 4p
Contribution from Balances 1p 0p
Total 100p 100p
20Comparison of Expenditure: Pence per Pound
Expenditure 2019/20 2020/21
Management 37p 38p
Provision of Services 9p 10p
Repairs 17p 17p
Other Expenditure 3p 2p
Provision for Bad Debt 1p 1p
Depreciation 19p 19p
Cost of Debt 12p 13p
Contribution to Reserves 2p 0p
Total 100p 100p
21Meeting Timetable
• Sheltered Housing Forum – 25th October 2019
• Tenants’ Assembly – 29th October 2019
• Cabinet Meeting – 13th January 2019
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