Mar 8th 2015, 16:38
Last week we published the March 2015 edition of the ‘AWICS Housing News’. It contains articles on:
Your FREE copy can be downloaded from HERE
There is much discussion in the national media as well as in the local government and housing media about the need for more social and affordable housing and how alternative government policies could assist or inhibit this.
However, a threat to councils’ house building programmes also exists in the form of the accounting arrangements for valuation, depreciation and impairment that will come into force in 2017. Council houses are valued at ‘existing use value for social housing’ that is a lower value than market value. From 1st April 2017 any impairment (downward revaluation of dwellings) will be charged to the housing revenue account (unless there is a revaluation reserve which there usually isn’t). This creates a ‘notional charge’ to the housing revenue account that could make new build unaffordable. Let me give an example: A council builds five houses at a cost of £750,000. The market value is £1,185,000. The existing use value for social housing would be £379,000 (being 32% of market value). There would therefore be an impairment charge to the housing revenue account of £371,000 (£750,000 less £379,000) that would have to be met by making savings in budgets such as repairs and maintenance. This is an issue that the Chartered Institute of Public Finance & Accountancy and the Department for Communities & Local Government need to get a grip on!
While most media attention is focused on the general election, the elections for the National Council of CIPFA are also being held at the moment. Last year the turnout was pathetically low. Of the 12,976 members eligible to vote only 1,698 (13%) did so. CIPFA has some important challenges ahead and there are real differences between the candidates. I have voted already. If you are a member of CIPFA I would urge you to vote also. We don’t really want another victory for apathy!
We have created a short, anonymous survey because we would like to know what our customers, users of our website, readers of our newsletters and others in the world of housing, local government and public services think about us and our services. Many people have already taken part. The feedback is interesting and will help us to develop our services to better meet people’s needs. To take part please visit:http://form.jotform.me/form/50612526489459
Our seminar and workshop ‘All You Want to Know about Service Charges in Social Housing’ that will be held on 20th May 2015 is now fully booked. We will therefore be arranging another session soon. When details are available they will be published HERE
Our next seminars and workshops ‘All You Want to Know about Housing Association Finance’ that will be held in London on 19th May 2015 still has a few places available – Further details can be found HERE
Last week I took part in a Local Government Association finance peer review at Slough Borough Council. I am very grateful to the Local Government Association and Slough Borough Council for offering me this opportunity and hope that the review will be very useful to the Council.
The Local Government Association’s peer review programme is well established and enjoys a high reputation throughout local government. It enables local authorities to access good advice about continuous improvement from people who understand local government and are there to help. It also provides assurance to stakeholders, including residents, that the local authority seeks external challenge and is delivering services effectively.
The finance peer reviews are a new initiative and focus on the financial management of the local authority. The Local Government Association is currently piloting these in a small number of local authorities of which Slough Borough Council was the first. The review is based on five themes as follows:
The Local Government Association’s team consisted of four people: The Deputy Leader of a City Council; the Finance Director of a City Council; an officer of the Local Government Association and myself. The process that we followed was to spend two days at the Council speaking to members, officers and other stakeholders, preceded by studying written and other material. On the second day we provided feedback to the Council’s management team and Leader.
I found it incredibly interesting speaking to the people at Slough Borough Council and working with my colleagues on the Local Government Association team to provide some analysis and advice that I hope Slough Borough Council finds valuable.
I am now in the process of drafting our report which, after input from other team members, will be presented to the Council. The Local Government Association's Guide to Sector Led Improvement for Finance can be downloaded from HERE
More information on the peer challenge programme can be found on the Local Government Association website at http://www.local.gov.uk/peer-challenge
Last week also saw the United Kingdom government’s 2015 budget. We have published a briefing paper on the implications for local government and housing that can be freely downloaded from HERE
This week I am Chairing the March board meeting of Impact Housing Association. The agenda includes our residents’ offer and annual report; key performance targets; partnerships; financial viability rating (which continues to be the highest possible rating at V1) and an update from our tenants’ and residents’ association. We are also interviewing potential new board members this week.
Our next seminars and workshops are as follows:
Last Tuesday I presented ‘All You Want to Know about Local Authority Housing Finance 2015’ in London. This session was fully sold out. I am very grateful to everyone who supported us by attending. The feedback was also very favourable as follows:
Comments that were made included:
Our next session will be held in Oldham on 7th July 2015. For further details please click HERE
This seminar and workshop is also available in-house. For more information about in-house opportunities please contact me at Adrian.firstname.lastname@example.org
Last week we also launched ‘All You Want to Know about Housing Association Finance 2015’. This seminar and workshop provides an introduction and overview of the finances of Housing Associations and will answer the following questions:
It is suitable for housing association board members, non-financial managers, resident representatives and finance staff who are new to housing associations. It is also suitable for people in local authorities and other organisations who would like a greater understanding of housing association finance.
There will be a session in London on 19th May 2015 and another in Oldham on 29th September 2015. For more information please click HERE
I am standing down as Chair of Impact Housing Association in June after six years on the board and four years as Chair. As I am currently the only accountant on the board the Association is looking to recruit a new board member who is either an accountant or someone with significant experience of financial management. The role attracts a fee of £2,000 a year plus expenses and involves attending a monthly board meeting held in Carlisle, Kendal, Penrith or Workington and some other duties. This is an excellent opportunity for an accountant to contribute to an excellent housing association and to gain invaluable experience. More information about Impact Housing Association is available on their website at www.impacthousing.org.uk Anyone who has any questions or who would like to be considered should contact me at email@example.com or 017683-52165.
This week I will be taking part in a Local Government Association finance peer review at Slough Borough Council. I am very much looking forward to this and hope that the review will be very useful to the Council.
On Wednesday the Chancellor of the Exchequer will present his final budget before the 2015 general election. I will be interested to see whether it contains any new initiatives for housing or local government. I would like to see additional resources for social and affordable housing and significant devolution to local government. I will follow the budget with interest.
Last week I had meetings at Eden District Council and Richmondshire District Council. Both authorities serve mainly rural areas in Northern England and both are understandably concerned about the supply of social and affordable housing in rural areas.
Many local authorities in urban and rural areas are looking at potential delivery vehicles for new build council housing and much has been said about the options that are available. However, in these discussions my attention was drawn to the question of balance sheets.
Now – in seventeen years working as a local government officer I cannot remember a Senior Management Team or a group of councillors ever looking at a balance sheet, other than to ‘rubber stamp’ it prior to publication. In contrast, in private companies and housing associations balance sheets are frequently examined by management teams and boards.
However, local authority balance sheets can be interesting and that of Eden District Council is a case in point. It shows that the Council has a net worth of £39million but that only about half of this (£20million) is used to provide property, plant and equipment to deliver services. The remainder is held as investment property (£14million) and short-term investments (£5million). For an authority that has identified affordable housing and economic development as major priorities I would have thought that using this resource to provide housing and other infrastructure would be preferable to using it to make investments!
Furthermore, if Eden District Council was a housing association I am sure that it would be severely criticised by the Homes & Communities Agency for failing to ‘sweat its assets’ and to deliver value for money. Housing associations are expected to use their assets to support borrowing to fund further investment. Typically, there is a ‘gearing’ of 70% between long-term borrowing and reserves. Eden District Council’s long-term borrowing is £0.2million so its ‘gearing’ is less than 1%. If it were to achieve a ‘gearing’ of 70% it could borrow an additional £26million.
The Council therefore has a very strong balance sheet but does not appear to be using the opportunities that this presents to invest in infrastructure and housing in the district. I suspect that Eden District Council is not alone in this!
Penrith Town Hall where Eden District Council is based
The London Assembly’s Housing Committee has recently published a report ‘Knock it down or do it up’ that examines London’s regeneration schemes. It reveals that while regeneration schemes have increased housing density and have increased the supply of homes for market sale and intermediate rent, they have also resulted in a net loss of 8,000 social homes. This report is likely to increase the controversy that is often associated with regeneration schemes such as that in Cressingham Gardens in Lambeth. Are market sales a good way of increasing housing supply and providing resources for affordable housing? Or do we need to guard against regeneration schemes becoming a vehicle for relocating social tenants away from high value areas?
Tomorrow I will be presenting ‘All You Want to Know about Local Authority Housing Finance’ in London. This session has fully sold out. I am very grateful to everyone who is supporting us by attending and am looking forward to meeting all the delegates. I hope that they will all find it a useful day.
Our seminar and workshop ‘All You Want to Know about Service Charges in Social Housing’ that will be held in London on 20th May 2015 is also proving popular and there are only a few places left. If anyone would like to attend but has yet to make a booking I would recommend that you book soon. To find more information about the session or to make a booking, please click HERE.
When Cumbria County Council consulted the public on their budget for 2015/16 they also asked for views on whether the current two-tier system of local government in Cumbria should be replaced with a unitary council. A majority of respondents supported the idea of a unitary council but the idea has not been well received at Westminster. According to the ‘Cumberland & Westmorland Herald’ the Council has received the following feedback from Kris Hopkins, a minister at ‘Communities & Local Government’:
“Given the precarious state of public finances the government believes that this is not the time to undertake… restructuring of local government. It is just not sensible to distract local government from the core task of devolving and providing services in a cost efficient and effective way.”
I would have thought that a proposal to save £68million a year by reducing unnecessary bureaucracy would be timely at a time of austerity – but apparently not! It seems that Cumbria, with its ½million population must see significant cuts in public expenditure but must soldier on with 368 district and county councillors and seven chief executives! The same situation obviously exists elsewhere.
The same newspaper article describes Stewart Young, the Council leader, as being ‘depressed’. However, if I was him I would tackle my ‘depression’ by seizing on the word ‘devolution’ in the minister’s response. Perhaps his next proposal should be for ‘real devolution’ to Cumbria including control over the National Health Service, education, transport, welfare and taxation. The potential for improved services and lower costs from better integration of health and social care services alone is probably even greater than the opportunities that would be presented by a unitary authority.
Disturbing statistics are emerging about ‘right to buy’. I am just old enough to remember the arguments that were made in the 1970s before the right to buy was introduced. Opponents of the policy argued that selling council houses would reduce the council housing stock creating a shortage of affordable housing. Supporters of the policy argued that this would not happen because ‘right to buy’ would generate capital receipts that could be used to build new homes; while if ‘right to buy’ was not introduced tenants would remain in place and homes would not become available to new tenants.
In practice the opponents of ‘right to buy’ were proved right as the capital receipts were not used to fund new build either by local authorities or housing associations.
However, we were told in 2012 that the ‘reinvigorated right to buy’ would be different in that there would be ‘one-for-one replacement’ of the homes that were sold. Right from the start there were those in the sector who were sceptical about whether this would be achieved. However, three years into the programme and ‘Inside Housing’ has revealed some shocking figures. Since 2012, 26,185 council homes have been sold in England and 2,712 new homes have been started. As 10,000 sales were expected initially the ‘one-for-one’ policy should have resulted in 16,000 homes being built. This seems more like ‘one-for-six’ than ‘one-for-one’.
In Scotland and Wales there has been no ‘re-invigorated right to buy’ and steps are being taken to bring ‘right to buy’ to an end. In Scotland, councils are building significant numbers of new homes in the housing revenue account while in Wales the self-financing settlement that starts in April 2015 specifically provides local authorities with resources for new build. The contrast in approach between the three nations is interesting!
This week I will be finalising the 10th March session of ‘All You Want to Know about Local Authority Housing Finance’. This has proved to be a very popular session. I am grateful to all those who will be attending. I will look forward to meeting them all at what I hope will be a very useful session for everyone.