Or in the Case of Councils, the HRA

This is a continuation of my previous articles, aimed at supporting our colleagues new to housing or interested in deepening their understanding of housing finance, self-financing, debt, and the significant challenges surrounding the HRA.

The Southwark report, a highly anticipated document that we hope will shed light on the current challenges and potential solutions to the HRA puzzle, is on the horizon. Its release, however, coincides with an election, which could influence the level of attention it receives.? For Councils, the report's findings will undoubtedly offer valuable insights for our ongoing discussions and strategies.

??Our CEO recently posed a thought-provoking question: ‘What would the situation be if the rent policy, particularly the 10-year settlement, hadn’t changed?’ This query, while seemingly straightforward, has significant implications. I will share an example later, courtesy of Angie Marshall-Smith of Abovo Consult, to illustrate this.?

However, it's important to note that the issue at hand isn’t solely about the rent policy. It also involves the self-financing debt, which refers to the debt that local authorities assumed control of in 2012. This debt, I must stress, is unlikely to be written off by the Government. Even if it were, many councils have incurred additional debt to finance new builds and capital projects. This debt issue is akin to a hamster wheel, perpetually spinning.?

Pressure on the Revenue pot due to increasing cost of repairs and staffing.

Inability in some cases to contribute to the Major Repairs Reserve (the pot used to fund capital works)

Need to borrow to fund the Capital programme

Interest taken out of the Revenue pot

Less in the revenue pot for repairs and Staffing

It goes round and round until the HRA pops.

Now, let's demystify the concept of ‘lost rent’ from 2012 to now. Understanding its implications is crucial, as it directly affects our financial planning and resource allocation.

This is an example where the income in 2012 starts at just short of ￡13M and self financing debt ￡57m.

Thank you to Angie Marshall-Smith from Abovo Consult, who produced this example and is our go-to resource for HRA business planning

My next article will examine the ‘conflicted’ positions some councils find themselves in.

?‘To build or not to build.’

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