Consultation on Rents and Service Charges

New Rent and Service Charge levels from April 2014 and beyond

Background

• Cost of council housing and rents charged to Housing Revenue Account (HRA)

• Council have to plan on a 30 year model of cost and income

• Over the year some costs forecast to increase• What has changed since last year?• New Right to Buy rules• New rent setting rules

New Right to Buy

• New Right to Buy (RTB) rules has increased the number of houses being sold, and forecast to sell in the future

• This has cut the forecast income to the Council• Although the houses have been sold, discounts

on RTB mean that income from sales is small• The council still has to pay debt, even if houses

are sold

New Rent Setting Rules

• In June the Government said that from April 2015 rents can only go up by inflation plus 1% at most

• Wolverhampton is below target rent (the government’s view on what rent should be)

• This is now the last year WCC can set a rent under the old rules (£2.08 p.w. > inflation)

• Rent collected forecast to reduce by £66M over 30 years in latest forecasts.

Impact of Universal Credit / Direct Payments

• Wolverhampton Homes and the TMOs will be putting more resources into collecting rent and charges

• Universal Credit is already increasing the amount of rent tenants are personally responsible to pay (e.g. bedroom tax)

• Direct payments will mean by 2017 we will have to collect all rent direct

Debt Management Costs

• Overall Council has £315M of housing debt• Cost of interest is paid from rents• Borrowing is planned to be a means of paying

for new build etc. over next 30 years• Cost of paying for borrowing is forecast to be

higher than a year ago • Over 30 years, borrowing cost in HRA up

£170M

Capital and Maintenance Spending

• Overall capital spending is forecast to increase by £53M

• Maintenance spend forecast up £4.4M• Pressure long-term to replace properties lost

from Right to Buy

Financial Impact  Forecast

£000Original surplus forecast 44,585  Reduction in rents (66,385)Add increased: Maintenance costs (4,224)Borrowing costs (169,692)  Add forecast increase in: capital spending (52,977)  Shortfall at end of year 30 (248,693)

Impact on Wolverhampton Homes

• WH management fee has not increased for 2 years already

• Council are proposing an indicative freeze for another 5 years

• A definite freeze for next year• 5 years would be an estimated real-terms cut

of 15%-20%• Pay only up 1% in last four years has helped

minimise impact of freezes

What does this mean for rents?

• Council has a £249M shortfall to make up on the HRA

• This year’s increase based on current increase rules

• Council are proposing a rent increase of 6.25% • After this, rents to go up by a max. of inflation

+ 1% (should be around 3.5% - 4% per year)

Rent Increase from April 2014

• Current average rent £76.72• Due to go up 6.25%• Average rent from April 2014 £81.41• Increase in average rent per week £4.69

Likely rent increases after April 2015?

• Future rent increases are likely to be lower• Future annual rent rises will be inflation based• Increases are likely to be around 3.5% to 4%

per year from April 2014• This would be a £2.60 - £3 per week increase

based on current average rents• This new government set formula will apply

every year from April 2015 onwards

What does this mean for Service Charges?

• Proposals are:• Charges will not change, except:• District Heating charges will go up – as gas and

electricity costs have gone up and the Council are still not recovering full costs (22%/15%)

• Garages up either 6.25%, same as rents, or 7%• Communal cleaning up 46p per week• Concierge charges down or same as last year

Garage Rents* Follow Increase in Dwelling Rents

OptionAverage Rent

13/14 *(£pdpw)

Total Income 2013/14

Compared toOption A

(A) 7% (Tenants/Leaseholders) 4.43(Others / 3rd Garages) 6.36

£803,000 -

(B) 6.25% (Tenants/Leaseholders) 4.40(Others / 3rd Garages) 6.31

£797,000 -£6,000

* Ex. VAT

Current charges £4.14 and £5.94 for non-tenants.

Prices quoted exclude VAT. VAT chargeable to

non-tenants and leaseholders, or 3rd and

subsequent garages.

Service Charges

Charge 2013/14p.w.

2014/15p.w.

Increase

p.w.Total

IncomeCost

Recovery

Sheltered Schemes Communal Facilities

£3.00 £3.00 - £88,000 98%

Central Heating £2.00 £2.00 - £2,145,000 51%

Digital TV £0.64 £0.64 - £214,000 100%

Communal Cleaning £2.36 £2.79 £0.43 £220,000 76%

Service Charges

Charges13/14p.w.

14/15p.w.

Increasep.w.

TotalIncome Cost

Recovery

District Housing Mtce £6.00 £6.00 - £326,000 90%

District Heating Usage(exc. Ellerton Walk) £8.08 £9.91 £1.82 £542,000 84%

District Heating Usage(Ellerton Walk) £15.50 £17.83 £2.33 £153,000 93%

Fencing £2.00 £2.00 - N/A N/A

Concierge Charge (1)

Charge Option Chosen by Ballot

LAST YEAR CHARGE£p.w.

Income(£M)

Cost of Service

(£M)

24-hour on-site Concierge Support(same)

£16.45 £600,000 0.6

8-hour on-site Concierge Support without remote CCTV and door entry(same)

£8.04 £100,000 0.1

Mandatory only – Essential Caretaking Duties (£5.25) £4.22 £100,000 0.1

Mandatory plus Remote CCTV and Door Entry (£9.25) £8.40 £700,000 0.8

What can WH do to help

• WH can’t change what the increases will be, but...• Estate Managers – basic money advice• Money Smart Team – more detailed help• Citizens Advice – specialist debt help• If you want to know more, speak to your Estate

Manager, go on-line to our website or call Homes Direct.

Feedback

• Whilst there is only one rent option being put out to consultation WCC want your feedback on the specific proposals in the presentation

• Views on rent increase proposal• Views on service charges