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Housing Business Planning Assumptions and Uncertainties

Briefing Paper

In 2011, the Chartered Institute of Public Finance & Accountancy advised that:

“The real power of self-financing develops over the medium to longer term as the surpluses increase due to real terms rent increases outstripping inflation on costs. The revenue surpluses… are the used to address investment needs and service debt.”

However, the increasing surpluses have not materialised, mainly because of the policy of reducing rents in cash terms by 1% a year between 2016 and 2019. Furthermore, the certainty that self-financing was meant to introduce to facilitate long-term planning has not occurred either.

The new uncertain environment requires a different approach to business planning. In the past, it was usual to produce a single strategic plan and financial forecast that represented what the Council expected would happen. This is no longer sufficient. There is a need to treat this business plan as just one of a number of possible scenarios. There is a need to stress test this base business plan to establish how it would respond to changed assumptions; and then to develop contingency plans to address any issues that arise. To date, this approach has been developed further in housing associations than in local authorities with the Homes & Communities Agency promoting ‘stress testing’ through ‘Regulating the Standards’.

This briefing paper examines the assumptions that local authorities can make surrounding the key uncertainties that affect business planning. Some of the discussion is also relevant to housing associations. It includes sections on:

  • Inflation
  • Dwelling Rents
  • Service Charges
  • Voids and Bad Debts
  • Non-Dwelling Rents
  • Other Income
  • Management Costs
  • Repairs & Maintenance
  • Efficiency Gains
  • Capital Financing Costs
  • Stock Levels
  • Capital Programmes
  • Prudential Borrowing
  • Capital Receipts
  • Government Grants and Contributions
  • Revenue Contributions
  • Major Repairs Reserve

When preparing their housing business plans, local authorities will have to consider the key issues outlined in this briefing paper.

To download your copy, please click HERE

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More information about business planning

For further information about our seminar: 'Housing Business Planning in an Uncertain Environment', please click HERE

For further information about in-house training in Business Planning, please click HERE

For further information about business planning and management consulting advice and assistance that AWICS can provide, please click HERE

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