Housing finance, rents and service charges
Statement from Cllr Peter Bilson, Executive Member for Regeneration and Enterprise
Released: Wednesday, 30 January 2008
This represents one of the most challenging decisions that I can ever recall for the Council’s Housing Revenue Account, largely due to a very disappointing Housing Subsidy announcement made only two weeks ago.
I set out details of recommendations going forward to the next meeting of the Council on Wednesday, 6 February:
Housing subsidy settlement
Next year’s housing subsidy settlement from Government assumes that average rents will rise by 7.9% in April 2008. This means a loss of £5 million of housing subsidy to the Council’s Housing Revenue Account. The Cabinet has decided that an average rise of 7.9% is too large, and is recommending average rent rises be limited to 6%.
Once again, we are avoiding any housing subsidy penalties being imposed since average rents in Wolverhampton will not exceed Government limits. Average rents in Wolverhampton remain some £5 or 10% below those in neighbouring authorities and the Government’s Limit Rent used to calculate housing subsidy penalties.
Central heating service charges
Central heating service charges are being held at £2.70 per week. A further reduction is not possible this year, but will be reviewed in twelve months’ time.
Concierge charges
Concierge charges were raised for the first time in eight years to £3.15 per week in November 2007. This service is being heavily subsidised by £1.5 million per annum – being equivalent to £1.30 per week from tenants’ rents. This is clearly unfair and needs to be addressed but in as sensitively a manner as possible. Following consultation, this subsidy will be eliminated gradually over the next 5/6 years. Charges to existing concierge users will rise by £2 per week in April 2008.
Concierge charges will not be extended to cover tenants in Sheltered Services Schemes. Such tenants who receive this service will continue to make no payment in April 2008.
District and group heating schemes charges
District and group heating schemes charges are being raised by 10%. This is necessary to offset significant increases in fuel prices that now seem inescapable. Overall, this service will continue to be heavily subsidised by £0.5 million per annum. The Council accepts that the elimination of this heating scheme deficit will only be possible following significant Decent Homes capital investment over coming years. This will then deliver much cheaper heating systems, as well as being far more energy efficient and environmentally friendly.
In order to permit targeted service improvements, new service charges will be introduced in April 2008; £1.15 per week for communal cleaning across High Rise Flatted estates (other than Heath Town) and £0.50 for installing Digital TV wiring in high rise blocks.
Garage rents
In respect of garage rents, the Council has accepted a proposal to charge Leaseholders the same as Council Tenants. Garage rents will be revised as follows from April 2008:
- Tenants - From £2.96 per week to £3.14 per week
- Non Tenants (including VAT) - From £5.00 per week to £5.30 per week
- Leaseholders - From £4.26 per week to £3.14 per week.
|
Band |
No. of Properties |
£1.75 to £2.00
|
2 |
| £2.00 to £2.25 |
12 |
| £2.25 to £2.50 |
133 |
| £2.50 to £2.75 |
1,872 |
| £2.75 to £3.00 |
3,069 |
| £3.00 to £3.25 |
3,774 |
| £3.25 to £3.50 |
4,753 |
| £3.50 to £3.75 |
3,125 |
| £3.75 to £4.00 |
3,183 |
| £4.00 to £4.25 |
1,943 |
| £4.25 to £4.50 |
1,510 |
| £4.50 to £4.75 |
340 |
| £4.75 to £5.00 |
91 |
| £5.00 to £5.25 |
19 |
| £5.50 to £5.75 |
1 |
Rent rebate
Two-thirds of tenants will pay no more in April when the new rents and charges are implemented. This is because they will be protected by offsetting increases in rent rebate. This will be actioned automatically by the Council for all tenants currently in receipt of a rent rebate. I would urge tenants not in receipt currently of a rent rebate to seek information from the Council’s Housing Benefits Section as to whether or not they qualify.
Rent restructuring
Wolverhampton, like all housing authorities, is also having to calculate rents on a new basis as defined by Government – the so-called rent restructuring. This now seems likely to be phased-in over a fifteen year period ending in 2016/17, and has been included within the overall average rent increase figure.
Under rent restructuring, it is very difficult to cushion or cap large rent rises for some tenants. The Government has requested that no individual rent increase should be more than 4.4% plus £2.08 (on a 50 week basis). Wolverhampton is meeting this requirement, which has the effect of limiting 125 tenants’ rent increases.
Recommendations
The Council accepts that proposals to increase rents above the underlying rate of inflation will be unpopular, and so too may be the phased removal of subsidies for concierge services. Unfortunately, many of the Council’s costs – such as fuel bills – are rising very significantly due to factors outside of our control.
Even so, these recommendations provide no additional resources to deliver day-to-day services. In fact all service providers – such as Wolverhampton Homes, Tenant Management Organisations, Estate Management Boards and Sheltered Services – will need to deliver efficiency savings of at least 3% in 2008/09, with further significant levels of additional savings required in later years. This represents a very challenging agenda.
These challenges can be partially addressed as a result of the additional capital investment that has been secured following Wolverhampton Homes gaining a 2-star inspection result. Capital investment in Council housing will almost double – rising from £44 million in the current financial year to around £85 million per annum thereafter. Clearly, without this massive injection of capital investment, the outlook for services to tenants would have been far worse.
The Council will finance Decent Homes capital investment by borrowing – effectively taking out a mortgage. This will then result in annual capital finance charges. However, there will be no impact on tenants’ rents as a result of these increased capital finance charges. This will be fully funded by additional housing subsidy. Even after allowing for this, Wolverhampton’s HRA will have to pay an increased “surplus” to the Government; rising from £3.3 million in the current financial year to £5.9 million in 2008/09.
Overall, I continue to believe that tenants in Wolverhampton receive value-for-money housing services at rent levels well below those in neighbouring authorities. The national housing subsidy system aims to treat all housing authorities fairly. The challenges facing Wolverhampton will therefore be repeated across all housing authorities in England. Overall, I believe that each of our service providers will rise to and meet these challenges, and will continue to provide high quality services.
Councillor Peter Bilson
Executive Member for Regeneration and Enterprise
Issued by the press office.