Agenda item

To receive and make recommendations on the Housing Revenue Account Business Plan and Budget 2026/27.

The Panel received the Housing Revenue Account Business Plan and Budget 2026/27 report. Every year, the Council sets a business plan for its Housing Revenue Account (HRA). This business plan considers projected income and expenditure over a 10 and 30-year period. The report provided an update on the aims and ambitions across the medium and long term and proposals for the 2026/27 budget which were due to be presented at Council in March 2026 for approval. The report was introduced by Kaycee Ikegwu, Head of Finance, as set out in the agenda pack at pages 105 – 128. The cover report was included in the additional papers agenda pack. Sara Sutton, Corporate Director of Adults, Health & Housing was present for this item, along with Rachel Sharpe, Director of Housing, and Robbie Erbmann, Delivery Director. Cllr Sarah Williams, Cabinet Member for Housing and Planning was also present. The following arose as part of the discussion of this agenda item:

a.    The Panel sought clarification around revenue contributions to capital and the plan to deliver an £8m surplus. The Chair noted that the surplus was forecast at £0.65m next year and £3.8m over the MTFS period. In response, officers clarified that the surplus target was an internal ambition that service set itself in relation to revenue to capital. This was done a few years ago, in relation to the level of risk that was being carried with the significant investment into existing stock and new homes, and determination that it was prudent to build in that level of revenue contribution to capital. Since then, a number of factors had made this increasingly difficult to achieve, in particular rising interest costs.

b.    In response to a follow up question, officers advised that the current business plan was a worst case scenario and that it was hoped an improved position would be reported in the final plan reported to Council in May. There were a number of things that had not been factored into this version, such as rent convergence as the service was waiting for government guidance to be released in January. Discussions were also being progressed with the GLA about covering interest costs in the construction period. It was envisaged that this would also  improve the current position. Officers were also looking at implementing efficiencies within the service to improve the revenue costs to capital. 

c.     The Chair sought clarification that by the end of the MTFS, £76m a year from the HRA would be spent on capital financing costs, which roughly equated to 30% of the overall budget being spent on servicing debt arising from the investment into existing stock and building new homes. In response, officers acknowledged that this was the case and that any major investment, on the scale that was being done in Haringey, would see increasing debt repayment costs. Officers advised that rental income would also increase as a result, and that years 7 onwards of the plan showed a significant surplus being generated from the HRA. It was commented that rising rental income tended to generate income growth over time due to inflation, particularly as interest costs remained static.

d.    The Chair commented that this was hard to understand the level of debts that were being carried by the HRA, as the report only showed the capital financing costs. The Chair commented that he would like to understand the level of debt being carried by the HRA in future reports and the trigger points. In respect of a repayment plan, officers advised that they were looking at this, but there was no requirement for one. Instead, the industry standard was to monitor the loan to equity value of properties. The industry standard was a ration of 60/40. Haringey was currently below 50%. The Chair requested that this indicator be included in future reports.

e.    The Panel queried whether the report showed that the New Homes Building programme effectively ended in latter years of the plan. In response, officers advised that the forecast represented schemes that were currently in the delivery programme i.e. they had been approved by Cabinet and they had active viability undertaken on them. Further schemes would be added as an when they were approved by Cabinet and underwent a viability assessment.

f.      The Panel sought clarification about whether any problems were anticipated going forwards with being able to balance the HRA. In response, officers confirmed that the plan as presented showed a balanced position, and that this was based on a set of assumptions that were worst-case scenario.

g.    The Panel queried the discrepancy between formula rents and the rent cap and why the difference was proportionally much less for larger homes. In relation to HCBS properties, the Panel queried which rental scheme they were charged under. In response, officers advised that the rent cap was set centrally by government. In relation to HCBS properties, these were charged at Local Housing Allowance rates, which were significantly higher than either formula rents or London Affordable Rent.

h.    The Panel followed up on a point raised in the deputation by Defend Council Housing and asked for clarification about the differing levels of increases in service charges for leaseholders versus council tenants. In response, officers advised that the general point was that the Council had to recover costs from whichever tenure the service charges were being applied to. Officers suggested that the examples given by Mr Burnham didn’t appear to be directly comparable. If the concerns raised in the deputation were referred to first tier tribunal, they would look in detail at the service charges and the methodology to see whether they were comparable.

i.      As a follow-up question, the Panel sought clarification about how the Council differentiated between different block and different tenures in terms of service charges. In response, officers advised that within each service charge there was a difference in usage, location, block etc. and there was a methodology that looked at what was actually provided to that site in terms of tenure mix. A number of these services were pooled and the individual rate would be affected by the number of properties in that pool. The apportionment between leaseholders and tenants may look different, but the methodology ensured that leaseholders only paid for what they received and likewise for tenants. The Cabinet Member stressed that having this reviewed at a tier one tribunal was normal practice, and that this was what the tribunal was there for. Officers set out that the general principle was that receipts were pooled against the numbers contributing towards that particular charge in that location.

j.      In response to a further follow-up, officers advised that pooled receipts could be pooled by block and location, and that the total cost was divided by the number of leaseholders/tenants in order to ensure it was proportional. Officers clarified that the figures in the report for individual service charges were effectively an average that was used internally. Those receiving bills for service charges would receive and indicative bill and a final bill. Once the HRA Business Plan was agreed by Cabinet individual bills would be calculated and sent out to tenants and leaseholders.

k.     In response to a question, officers provided assurances that leaseholders and tenants paid the same amount of service charge if they received the same service.  This would be checked by adding up the service charges received from both sides and making sure this was the total cost of providing that service. Assurances were given that one group didn’t proportionally pay more than the other.

l.      The Panel queried a scenario raised earlier in the meeting around service charges for having a door entry system and queried whether tenants/leaseholders were being charged for this if it was defective. In response, officers advised that for tenants, in the eventuality of a failure of service, there was a policy that would set out what refund or credit is applied, within a designated period of time. For leaseholders, communal repairs were picked up in addition to ongoing service costs and so it wasn’t comparable with the service charge to tenants, as they paid for communal repairs through their rent costs.

m.   The Panel queried the extent to which service level agreements were in place for things like grounds maintenance. In response, officers advised that there was some form of agreement in place for all the different services that were provided, whether that was a contract, service level agreement, or other delivery mechanism. These were reviewed and a review of the SLA for grounds maintenance was underway involving the resident’s voice board.

n.    The Panel queried why the figures at Table 6 of the business plan showed reduced levels of investment in repairs after Year 1 (2026/27). In response, officers advised that that there were a lot of one-off items that artificially inflated the budget line in Year 1, such as higher disrepair costs. These were expected to tail off in Year 2 onwards.

o.    The Panel queried whether the cost and number of repairs could also increase as a result of the Council building more homes. In response, the Cabinet Member suggested that these were new builds and shouldn’t require a lot of repairs. It was suggested that a lot of the repair work was driven by the need for major works to be carried out, particularly in places like the Noel Park Estate. Once those major works were completed the repair issues should drop dramatically. It was also envisaged that the increase in the number of Decent Homes should also result in fewer repair claims. The mobilisation of the partnering contract would enable significant progress to be made on repairs. The Head of Finance advised that that Table 6.1 captured increased investment in repairs from Year 6 to Year 10.

p.    The Chair commented that the proposed HRA Capital Programme at Table 7 of the report showed approximately £1billion investment in things like the major works and the New Homes Build Programme in 2026/27-2030/31, and that this then reduced significantly to around £145m in Years 6-10. The Chair queried whether this reduction in capital spend was overly optimistic, given the continued need for investment and sites for the New Homes Building Programme coming online. The Chair questioned what level of challenge and difficulty this presented, given that the borrowing costs were around £290m. In response, officers advised that the exposure to risk identified in the report arose from the fact that assumptions had been made on what borrowing rates would be over the next five years. Officers had taken a position and used a model that was felt to be prudent. The key risk was in the eventuality that a major global event happened that impacted borrowing rates, like the war the Ukraine. If this happened and borrowing rates increased above what had been assumed, then this would be a big challenge. Officers advised that currently, the market rates were slightly below the rate that had been assumed for the current year. If this trend continued, the level of risk would be relatively low.

q.    In relation to the above point, officers advised that the figures seen here had been modelled over 30 years and that the HRA Business Plan ensured there was enough interest cover for the borrowing that was planned. Officers also commented that the HRA Business Plan was updated every year and that this involved looking again at the borrowing assumptions. In addition, the Housing service looked at the business plan on a quarterly basis and that the risk profile of new projects was assessed in that quarter, as well over a longer term. The Corporate Director advised the Panel that the Council received external validation and assurance around the model it used and that the Council wasn’t marking its own homework.

r.      The Panel questioned how the organisation could ensure parity for tenants who were seeing year-on-year rent increases, but were not benefitting from have a new Council home. In response, officers set out that the New Homes Building Programme paid for itself, and that it actually grew the income of the HRA over time. Officers commented that they would not characterise the New Homes Building Programme as only benefitting the people that lived in those new build homes. The overall HRA position over the medium to long term benefitted, and this afforded more money to spend on services and other capital works.

s.     In response to a request for clarification, officers set out that from Years 2 & 3 after practical completion, the general trend was that the amount of rental income coming into the HRA from new build properties exceeded the interest costs. Over time, as rents increased, that gap would grow. The new homes made a net-positive contribution to the HRA as they brought in more income that they cost the HRA. Officers set out that properties acquired under the TA Acquisitions Programme returned a much higher rate of return to the HRA than new build homes. It was also commented that the New Homes Building Programme was supported by significant grant funding from the GLA that helped in terms of viability.

t.      The Chair sought clarification on whether, in effect, the Major Works programme was dependant on the additional revenue coming into the HRA from the New Homes Build Programme. In response, officers commented that what would be affordable may look different if there was New Homes Build Programme. Officers did not characterise one scheme as being dependant on the other. The Cabinet Member commented that doing Major Works at scale would have a big impact on a number of works streams across housing, particularly repairs and the need for decants due to repairs.

u.    The Panel put forward the following recommendations in relation to the HRA Business Plan:

·       Sustainability of Long Term Borrowing Costs- Further information requested for 19^th January OSC meeting  in relation to the sustainability of long term borrowing costs and the burden this places on the HRA. The Panel would like to understand how a sustainable level of debt is calculated. Including some further information around the ratio of debt, and interest markers, and how these are factored into an assessment that a particular level of debt is affordable. What red lines does the Council use in assessing that a certain level of debt would be unsustainable?

·       Sustainability of Long Term Borrowing Costs- Recommendation to Cabinet: That Cabinet gives consideration to the publication of an HRA Debt Management Plan alongside the HRA budget-setting process.?The Panel recognises the necessity of significant long-term investment in the HRA to address the condition of council housing and meet acute housing need. However, it is concerned about the cumulative impact of high borrowing levels on residents. The Panel recommends that the Debt Management Plan should clearly set out the Council’s long-term approach to reducing, as well as managing debt in order to provide transparency and assurance around the sustainability of the HRA. 

·       Tenant Affordability Assessment – Recommendation to Cabinet: That Cabinet give consideration to undertaking an assessment of tenant affordability, as it undertakes assumed year-on-year rent increases to its tenants as part of the planned investment programme. The Panel is concerned that that year-on-year rent increases would cross an affordability threshold at some stage and that the Council should be reviewing and modelling this.  

·       Neighbourhood Moves Scheme – Recommendation to Cabinet: That a?review is undertaken of the Neighbourhood Moves Scheme to assess its financial and strategic impact on the Housing Register.?The Panel is concerned that offering properties to households where there is no net improvement in housing need - such as cases where there is no overcrowding or priority change - should be reconsidered alongside the known additional costs to the HRA, including void costs and reletting expenses. The Panel recommends that the review considers whether amendments are required to ensure that limited housing resources more effectively to reduce the impact of the housing crisis. 

RESOLVED

That the Housing, Planning and Development Scrutiny Panel:

a)    Noted the draft report being presented to Cabinet on 9 December 2025 setting out the proposed 2026/27 budget and 2026/27 to 2030/31 and which includes proposed increases to rents and service charges. 

b)    Noted that the revenue financial position will be updated in January 2026 prior to Cabinet on 10 February – once government announcement on rent convergence is made.

c)    Noted that the capital programme might also be updated in January 2026 following any changes in the programme or confirmation of anticipated funding for new build programme.

d)    Noted that Cabinet on 10 February will be asked to recommend the final HRA 2026/27 Budget and 2026/27-30/31 MTFS, for approval to the Full Council taking place on 2 March 2026.

e)    Agreed the budget scrutiny recommendations set out in (Item 283) Paragraph U above, and agreed to send them the Overview & Scrutiny Committee for ratification and submission to Cabinet.