GOVERNMENT CONSULTATION ON THE REVIEW OF THE NATIONAL COUNCIL HOUSING FINANCE SYSTEM

1
GOVERNMENT CONSULTATION ON THE REVIEW OF THE
NATIONAL COUNCIL HOUSING FINANCE SYSTEM

• Presentation to the Residents Panel
• October 2009

2
Questions 1 and 2Should there be separate
Housing Account (HRA). Should the ring fence be
strengthened? Any ambiguities?

• There should be a separate account for the
  landlord service. (There is a separate income
  stream)
• Services received by the wider public should not
  be subsidised by the Housing Revenue Account
• Greater clarity is required on the definition of
  landlord services (e.g Housing Register)

3
Questions 3 and 4Should the system be based on
the Decent Homes standard?

• Decent Homes standard is too low (even with the
  extension to cover communal areas) and does not
  cover improvements to the stock or communal
  facilities
• We want to be able to achieve the Poole
  Standard-this should be a national standard

4
Questions 3 and 4Should any backlogs be funded
through capital grants? How to fund energy
efficiency improvements?

• Capital grants require us to apply for
  them-creates uncertainty and may be inflexible,
  linked to specific works
• Energy efficiency improvements require financial
  incentives, they should not be funded by savings
  of tenants. (Residents in fact accept logic of
  funding via savings but must be equitable and not
  penalise low users)

5
Question 5 Should leaseholders pay into sinking
funds? Should LAs have to set up sinking funds
or should it be voluntary?

• Lessees are not in favour of compulsory sinking
  funds
• What if the sinking fund is insufficient? Could
  the LA borrow funds and charge interest to
  leaseholders? Admin costs?
• Charge a higher sale price to leaseholders to
  take into account future investment?
• Better information to future leaseholders on
  potential liabilities.

6
Questions 6-11The Debt Question (Slide 1)

• Present system
• a) LA pays negative subsidy back to central
  government.
• b) The HRAs resources are based on annual
  assumptions by central government on management,
  maintenance and major repairs costs
• c) Central government takes the inflation and
  interest rate risks

7
Questions 6-11The Debt Question (Slide 2)

• The self-financing proposal
• Instead of paying negative subsidy, Poole takes
  on higher debt.
• The HRA takes inflation and interest rate risks.
• The amount of debt to be supported by Poole would
  be based on what is affordable after managing,
  maintaining and investing in the stock to reach
  decent homes standard. This is the present value
  calculation.

8
Questions 6-11The Debt Question (Slide 3)

• The response
• (i) Assumptions about the standards to be
  reached, (and how much they cost and how these
  costs are calculated) are crucial
• (ii) The decent homes standard is too low a
  standard
• (iii) Local circumstances need to be considered
• (iv) Include adaptations in calculations

9
Questions 6-11The Debt Question (4)

• Response continued
• (iii) The new debt may also have additional costs
  because of differences in interest rates and the
  way in which the debt will be accounted for. We
  would prefer these additional costs to be built
  into the present value calculation so that the
  new debt is not unaffordable.

10
Questions 6-11The Debt Question (5)

• Response continued
• (iv) The self financing system transfers risk
  from central government to the Council. (Under
  the current system changes in inflation or
  interest rates result in an adjustment to the
  amount of negative subsidy payable-it does not
  affect the Council). Therefore a self financing
  system must build in margins to take account of
  potential risks

11
Questions 6-11The Debt Question (6)

• Response continued
• (v) Councils might generate uncommitted surpluses
  through
• Efficiency improvements
• More favourable than anticipated
  interest/inflation rates
• Other miscellaneous income
• Councils should also be able to borrow against
  these surpluses

12
Questions 6-11The Debt Question (7)

• Response continued
• (vi) Councils should have discretion on how to
  spend this money. If we are able to achieve high
  standards then surpluses could be put towards new
  homes-if we cannot achieve high standards the
  surpluses should be spent on existing stock (e.g.
  environmental improvements/sustainability)

13
Questions12-14Capital receipts

• Currently receipts from RTB, in principle, go to
  central government and are spent principally on
  developing new homes across the country
• The risk in allowing RTB receipts being spent
  locally is a reduction in house building
  particularly in areas which may need it most and
  which have benefitted under the current system

14
Questions12-14Capital receipts (continued)

• But there is no point in building new homes if we
  allow the existing homes to deteriorate
• Councils should therefore have discretion on how
  to spend receipts from RTB.
• Review after a period to check for regional
  inequities

15
Questions 15-17Do proposals affect any groups
disproportionately?

• a) No obvious potential discrimination except if
  the proposals prevent higher standards being
  reached this affects the most vulnerable people
  in society
• b) There is a particular concern however about
  funding for adaptations. We think the required
  funding for adaptations should be built into the
  initial business plan

16
Other Questions Stock Transfer

• The consultation paper suggests creation of a
  level playing field between the self financing
  and stock transfer options
• We require more clarification on the exact
  meaning of this
• We also think that if self-financing is not an
  attractive proposition for tenants there should
  remain the opportunity to achieve higher
  standards through a transfer option. This would
  depend on being able to negotiate debt write off.

17
Other Questions ALMOs and other social landlords

• We think the ALMO model has been successful
  and would support the idea that ALMOs should be
  able to secure funding from external sources and
  to take on the management of other social
  landlords stock.