To receive the draft Housing Revenue Account (HRA) Policy for review. [Report attached]

Contact: Paula Mawson, Service Director –Communities & Customer & Mannie Ketley, Interim Director of Finance Improvement.

Paula Mawson, Service Director for Communities and Customer, introduced the draft Housing Revenue Account (HRA) Business Plan Policy, explaining that it had been developed following an independent review to provide a clear framework for the long-term management of the Council’s housing stock. She highlighted that the HRA was a ring-fenced, tenant-funded account and outlined the key policy principles, including maintaining safe and compliant homes, protecting the HRA’s financial sustainability, and supporting investment decisions through a 30-year planning approach.

In response to questions from the Chairman on the policy’s “golden rules”, Mannie Ketley, Interim Director of Finance Improvement explained that the HRA was currently fully compliant with these financial rules, which act as safeguards to ensure the account remains financially viable. She noted that the rules allow the Council to model future investment requirements, borrowing and regulatory pressures and provide early warnings if adjustments to the business plan become necessary.

Members also asked how the Council would monitor performance by STAR Housing. Paula Mawson explained that this would be achieved through regular contract and performance meetings, detailed financial monitoring, attendance at STAR Board and subcommittee meetings, and ongoing collaboration on the development of the HRA business plan. She added that issues could be escalated through formal contractual arrangements if required, although relationships with Star had generally been positive and constructive.

Questions were raised regarding the £174 million borrowing cap, future inspections and the treatment of debt within the HRA. Paula Mawson advised that the regulator would inspect the Council rather than STAR Housing, with approximately six weeks’ notice expected before an inspection. She stressed that the Council’s approach was to embed compliance requirements into everyday operations rather than simply prepare for inspections. Mannie Ketley explained that the borrowing cap represented the upper limit of affordable debt for the HRA and was routinely reviewed to ensure financial sustainability.

Members sought clarification on borrowing arrangements and principal debt repayments. Mannie Ketley explained that while interest payments were mandatory, repayment of principal debt within the HRA was discretionary, allowing resources to be prioritised towards maintaining homes and meeting regulatory requirements. She noted that loans could be refinanced where appropriate and that future principal repayments would be considered when financial capacity allowed.

Significant discussion focused on how recent regulatory changes were affecting the HRA’s ability to deliver new homes. Members questioned the previously stated aspiration to build 500 Council homes and requested more detailed data on housing stock numbers, capital expenditure, borrowing assumptions and future housing delivery. Paula Mawson explained that there were currently 4,073 homes within the HRA and that ongoing stock condition surveys were informing future investment requirements. Mannie Ketley advised that increased regulatory obligations, including compliance with Awaab’s Law and housing quality standards, had increased investment pressures, and further detailed information would be brought back to the Committee in November.

James Owen, Portfolio Holder for Housing, advised that the report focused on establishing the HRA Policy and its financial principles ahead of detailed consideration of the Business Plan in November. He emphasised the need to balance investment in existing housing stock, regulatory compliance and future housing development within a financially sustainable framework, while maintaining an ambition to maximise the delivery of new council homes and protect the Council’s housing stock.

Members expressed concerns about balancing investment in existing homes against the need to provide additional housing, the use of reserves, borrowing costs and governance arrangements. Officers acknowledged these concerns and agreed to provide further breakdowns of investment requirements, including distinctions between statutory obligations and discretionary improvements.

Recommended:

That the Committee note the draft Housing Revenue Account Policy and receive a further report in November setting out the detailed HRA Business Plan, including financial assumptions, stock projections, investment requirements, borrowing implications and housing delivery ambitions, to enable further scrutiny before consideration by Cabinet and Council.