Report of the Chamberlain and the Director of Community and Children’s Services.
The Sub Committee received a report of the Chamberlain and Director of Community and Children’s Services which presented a review of the 5-year finance plan for the Housing Revenue Account (HRA), analysed income streams and forecast costs and outlines the key challenges over the period.
The Chamberlain confirmed that the HRA is finely tuned; with no immediate pressures and income assumptions are very prudent. Members noted that sufficient time is allowed between the completion of schemes and rental incomes coming on line, and future developments will help to build capital and reduce borrowing and pressures on the account. The risks associated with construction inflation are also factored into budget forecasting. Members also noted the mitigations available in terms of rephasing works under the 30-Year Programme, and the high priority already given to fire safety works post the Grenfell Tower fire. Finally, the Chamberlain advised that the Finance Committee will be scrutinising these matters and suggested that Members (of the Housing Management Sub Committee) might wish to assist in their deliberations by setting out the assurances they required in terms of trigger mechanisms and timeframes, for example.
The Chairman of Finance agreed with the Chamberlain’s position, noting that the HRA reflects the risks carried by the entire City of London Corporation budget and there is an inflation reserve built into next year’s forecast. Whilst there can be some reliance on the wider contingencies within the City Corporation’s financial controls, it was accepted that some issues might need to be addressed more rapidly. However, the Chairman of Finance was satisfied that the HRA is in a better position than it had been for some time, and some of the risks might fall outside its scope.
In response to questions, the following points were noted :
a) Members asked for consistency when the figures are reported to the Finance Committee and Resource Allocation Sub Committees.
b) Members agreed that it would be helpful to receive an updated 30 Year Business Plan, in the Summer of 2022, with a series of options to consider in terms of prioritising the additional major works identified in the stock condition survey. The Chairman agreed that this should be added to the outstanding actions list.
c) City Fund revenue contingencies cannot be used for the HRA due to ringfencing. However, the biggest risk is construction inflation, which is covered for new build projects by the costed risk provisions for capital projects and funded separately by s106. Major works projects have a level of inflation to some extent built into their individual forecasts and risk registers.
d) Income assumptions are based on a short gap between completion of a development and rents being collected. The major works costs met by the HRA are net of assumptions around leaseholder recovery from service charges.
e) Sydenham Hill and COLPAI will be funded by S106 funding, with no impact on the HRA. The Sydenham Hill income projection is very prudent and other funding schemes; i.e. – income from car parking, have not been included.
f) The Chamberlain works with the Housing Team on project budget forecasting and the Project Managers adjust their outturn projections on a regular basis. Members noted that the figures in the report therefore represent a snapshot when the report was written.
g) If the Great Arthur House cladding legal issue is lost, then there will be an impact on other projects, but this risk is being closely monitored.
h) The Windows programme will be delivered within the HRA and is a significant part of the investment set out in the last 5 year programme. Whilst there are risks in terms of delivery and construction costs, all tender documents have been carefully scrutinised, a new Project Manager is in post and the Section 20 notices are due to go out this week. Members of the Housing Management and Almshouses Sub Committee are likely to receive a number of Gateway 5 reports in respect of the windows programme, which will provide regular updates on costings.
i) The HRA is a departmental, not corporate risk and it was suggested that the Housing Management and Almshouses Sub Committee should see the risk report on a regular basis. The Chamberlain endorsed this approach and also recommended it to the Finance Committee, who might want to add a specific point in the Medium Term Financial Risk, as this might be the best way to manage it corporately.
j) The City of London Corporation only charges social housing rents, which are subject to RPI increases. However, there are legal parameters around social and affordable housing rents, and they could be considered as part of zero based budgeting. Members are due to receive a report on rent increases and it was suggested that this be incorporated.
In concluding, the Chair welcomed a constructive and helpful discussion.
RESOLVED, that – the report be noted.