1. Council Housing Finance The Government’s plans for reforming funding for council housing

2. The current system  The Housing Revenue Account accounts for income and expenditure associated with the Council’s housing stock  The Government uses a formula to decide how much the Council should spend on managing and maintaining its housing stock and how much rent should be charged  If the guideline rent is less than the amount which the Government says needs to be spent, then the council receives housing subsidy from the Government  If the guideline rent is more than the amount which the Government says needs to be spent, the Council is required to pay negative housing subsidy

3. The current system  Around 170 local authorities are in the HRA subsidy system  A quarter receive subsidy but most councils, including Kettering, pay negative housing subsidy  This year, Kettering will collect £13.4 million in rent from tenants.  Negative housing subsidy payments will amount to £4.5 million  £1 in every £3 that our tenants pay in rent goes straight to HM Treasury

4. KBCKBC GOVTGOVT Rent £13m Payment to Govt £4.5m SERVICESSERVICES Retained for services £8.5m Or, put simply……….

5. The problem with the HRA system  It’s complex  We can’t plan properly because HRA subsidy determinations can fluctuate considerably from year to year  There is no connection between the rent tenants pay and the service they receive from the Council  The system is acknowledged by the Government to be underfunded  There are year-on-year “real terms” decreases in funding

6. £’ 0 We have paid DCLG £21.5m since 2005/06 116% increase since 2005/06 The problem with the HRA system

7. In 2011/12, under the current housing finance system,  Rents went up by 6.98%  We will collect £13.4 million in rents and charges  We will pay the Government £4.5 million (33%)  Only £8.9 million will be available for services The problem with the HRA system

8. The new system  In April 2012, a new self-financing system will be introduced:  We will be able to keep all our rental income  We won’t have to pay the Government  Expenditure allowances will be increased by 13% and there will be a new allowance for disabled adaptations  But, we will have to take on additional debt of £68.8m  The Government will take 75% of future sale receipts  The Government will effectively continue to ‘set’ rents

9. The pros and cons  System remains vulnerable to changes in national policy  Some key risks are outside council control – interest rates, house sales, bad debts, inflation  Not much change in early years Less volatility and uncertainty – will be able to plan with confidence over the long term Increase in management, maintenance and major repairs allowances and a new allowance for disabled adaptations More open and transparent – easier for tenants to hold the Council to account

10.  The fairness of the debt settlement  Structuring the debt in a flexible manner  Significant work required over the coming months The main issues for KBC

11. Council Housing Finance The Government’s plans for reforming funding for council housing