Agenda item

Housing Revenue Account Subsidy System


Neil Aves, Assistant Director, Housing Services, outlined a report setting out Government Proposals regarding changes to the national Housing Revenue Account (HRA) subsidy arrangements. The Committee was advised that the existing system required the Government to predict the rental income and spend of the Council which gave rise to a number of problems including, that only 3 months were available for the Council to set its housing budget in.  The new system would require the national housing debt to be divided up between Local Authorities. It was confirmed that in order to ensure that Councils do not acquire more debt than they can afford, a limit, as to how much money could be borrowed, would be set.  It was expected that legislation detailing the scheme would be implemented in April 2012.  Until that time it would not be possible to provide exact figures with regard to the Council’s expected debt, as this would to be generated by Government.


The Committee was informed that one of the benefits of the new system was that it would enable Councils to keep all rental income generated by their housing, as opposed to being required to return a proportion of the income to Government, as was the case under the current system.  The Assistant Director informed the Committee that it was expected that the debt acquired as a result of the scheme, would be paid off within 15 to 20 years at which point all rental income would become available to the Council.  Members where told that it would be of key importance to ensure that the scheme was run efficiently.  A project was underway to establish how much money would be required over the following thirty years, to maintain the stock in its present condition.  This would enable the Council to plan expenditure for projects, such as the replacement of doors and windows, as necessary.


A Member asked how long it would take before a profit would begin to be made as a result of the scheme and was advised that during the early years of the scheme the Council would be paying back a large sum of the interest and principle sum; however it was expected that after approximately five years the Council would begin to make a profit.


A number of questions were raised with regard to the ‘Right to Buy’ scheme, in particular, the implications of selling Council properties and who would reap the benefit from such sales.  The Assistant Director informed Members that the number of houses sold under the scheme had reduced significantly and it was predicted that between 12-18 houses would be sold annually.  This loss would be taken into account by the Government when calculating the Council’s estimated rental income.  The Committee was informed that the Council would retain 25% of capital at the time a property was sold; the further 75% became property of the Government who reinvested it in new affordable housing.


The Assistant Director advised that the Treasury would be looking into the possibility of borrowing for HRA alone, to ensure that the Council would not be prevent from borrowing for additional areas in the future.


Resolved  - That the report be noted.



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