Elected Member Briefing - Rent setting for 2024/25 - rent level options being consulted on with our tenants

About this briefing note

Report by: Elaine Ritchie, Senior Service Manager, Housing 

Date: 30 October 2023

Subject: Rent setting for 2024/25 - rent level options being consulted on with our tenants

Responsible Officer: Steven Coyle, Finance Team Leader, Communities

Details

Purpose

This briefing note gives an overview of proposals for rent levels for 2024/25 and provides information about how we will consult and engage with tenants on these proposals.

Briefing Information 

Background

The Scottish Social Housing Charter sets the standards and outcomes that all social landlords should aim to achieve when performing their housing activities. Outcomes 14 and 15 of the Charter are primarily linked to the rent setting process and the financial aspect/delivery of the Housing Revenue Account. These outcomes reflect a landlord's legal duty to consult tenants on the affordability of rent levels, and to inform tenants about how their rent money is spent. Discussions with tenants must also take place about rent levels, and any decisions made about rent levels should reflect tenants' views.

Discussions with tenants must also take place about rent levels, and any decisions made about rent levels should reflect tenants' views.

Our Approach

Assessing and Demonstrating Affordability: Perth & Kinross Council's rent levels are currently the fourth lowest in Scotland, remaining considerably lower than the national average. We have developed a model which allows us to look at local income levels in Perth and Kinross and, using this information we assess how affordable our rents are. The model also allows us to compare these with other local social housing providers and neighbouring local authorities.

Involving Current and Future Tenants: Our approach to consultation and engagement was shaped by our tenants and provides each tenant with an opportunity to become involved through our Rent Setting Survey and Summer Conference. Feedback is also gathered from applicants (future tenants) who have been offered one of our properties on our waiting list.

Providing Rent Increase Options: The most significant change in our approach over the last five years has been to provide three rent increase options that tenants can vote on. Each of the options is assessed in relation to affordability and the impact on service delivery and level of investment in tenants' homes.

How We Calculated Rent Level Proposals for 2024/25

The proposals for 2024/25 reflect feedback gathered from tenants through our Spring Rent Spending Priorities Survey and our Summer Tenant Roadshow events, about what their spending priorities are for Housing Services.

This year the Housing Revenue Account (HRA) is facing significant increases in costs in key areas of service delivery, including:

• Materials and labour to repair, maintain and improve tenants' homes
• Pay increases for staff
• Energy costs in offices and common areas
• Borrowing, with the Bank of England increasing interest rates from 0.1% in late 2021 to 5.25% in August 2023

As outlined above, we are continuing to face increased costs for materials which has a financial implication on both our revenue and capital budgets. We have and continue to face increases in the cost of purchasing general building supplies as well as inflationary increases to our service and maintenance contracts.

Increasing energy costs and high levels of inflation also continue to have an impact on the costs that the HRA. Ongoing discussions around the pay settlement for staff will also have an impact on our budgets. We have budgeted for a 3% pay award, any settlement higher than this will mean the HRA has to fund the increase, which has an impact on future year's estimates.

We continue to have some statutory duties that we need to carry out in 2024/25 which will involve a cost to the HRA. For example, we will need to carry out an Electrical Inspection Condition Report (EICR) on each of our properties. As a landlord Perth & Kinross Council is legally obligated to ensure all its domestic properties, including common areas of sheltered housing, have a current EICR. Properties are required to be tested every 5 years and additionally as and when there is a change of tenant.

As a landlord we are also responsible for the cyclical servicing and maintenance of many systems and items of equipment in domestic dwellings, multi-storey flats, and our sheltered housing complexes. The systems and items of equipment include the following:

• Lifts
• Electric Wet Heating Systems
• Heat Pumps & Renewable Technology
• Solid Fuel
• Water Testing
• Asbestos Removal & Testing
• Fire Alarms & Fire Prevention Equipment
• Emergency Lighting
• Lightning Conductors
• Electric Testing
• EPC
• Sprinklers

Our current staffing resource is insufficient to ensure that we are meeting all the requirements and obligations of these servicing and maintenance aspects. As part of the agreed budget last year, we deferred the funding of several posts by using reserves in 2023/24, these posts now require to be funded permanently from 2024/25.

In addition to the pressures highlighted above, there are several additional pressures that have been highlighted by staff.

• Increased staff within our Improvements Team to enable us to continue to meet the requirements of the SHQS and EESSH, along with the retrofit strategy.
• A dedicated Housing Enabler to allow the HRA to meet the target of delivering 80 new houses per year.
• Permanent investment in the Internet of Things project.
• Additional staff within our compliance team to ensure we meet the required compliance standards.
• Additional costs in relation to Electrical Inspection Condition Reports.
• A permanent Gypsy Traveller Project Officer to take forward the improvements within our Gypsy Traveller sites.
• Further inflationary increases in service and maintenance contracts.
• Investment in maintaining HRA roads and footpaths.
• Increased costs for the Housing Repairs Out of Hours Service.

These examples, along with some other cost pressures, such as borrowing costs and increased bad debt provision, means that that the HRA is facing significant cost pressures of just under £2.5million.

The required rent increase to fund the total pressures to the HRA for 2024/25 would equate to 7%, an average of £5.27 per week.

We are also fully aware of the financial issues our tenants are facing because of the significant rise in the cost of living, partly due to inflationary and high energy costs.

We have proposed ways of reducing the financial pressure on our tenants. Our proposals are to use some of the Covid reserves to defer a number of pressures until 2025/26. This will reduce the amount of funding required from a rent increase, therefore reducing the impact on our tenants. We are proposing to defer pressures amounting to £461,000.

However, even when this is factored in, due to the significant cost pressures faced by the HRA any proposed rent increase is going to be higher than in previous years.

Planned Capital Improvements

Our major Capital Investment Programme of improvements to homes will continue. We have already identified the funding to do this work which will include:

• Maintaining investment in building new homes.
• Continuing to invest in improvements to stock/areas such as:
• Central Heating and Rewiring (£700,000)
• Property Refurbishment (£1.68m)
• Kitchen Upgrades (£1.5m)
• Energy Efficiency (£596,000)
• Sound Insulation (£100,000)
• Structural Repairs (£250,000)
• Controlled door entry (£28,000)
• Fire protection measures (£100,000).

Rent Level Options for 2024/25

The three rent level options we have proposed also include investment in areas that tenants have told us are a priority. These include:

• More money to buy back ex-Council properties to provide additional housing
• Staff to tackle climate change and to achieve a net-zero housing stock, supporting tenants with new energy efficient technology in their homes
• Additional Trades Staff to support the introduction of an evening and weekend appointment system
• Continued funding to help tackle digital and financial exclusion
• Investment in fire sprinkler technology
• Tackling anti-social behaviour
• Continuing to improve our Repairs Service
• Investing in our Internet of Things project which supplied tenants with free household wi-fi sensors to help control and monitor conditions within tenants' homes.

The options that the tenants will be asked to consider are as follows:

Option 1 - A rent Increase of 6%

This would pay for:

• Fixed cost increases facing the HRA.

The following HRA financial pressures:

• Increased staffing requirements to meet the requirements of compliance and service & maintenance - £332,000
• Increased cost of materials - £229,000
• Contract price increases - £157,000
• Electrical Inspection Condition Reports (EICR) - £100,000
• Additional Trades Staff to support the introduction of an evening and weekend appointment system for our Repairs Service - £90,000
• Increased energy costs - £85,000
• Investing in our Internet of Things project which supplied tenants with free household wi-fi sensors - £56,000
• Increased Estate Based Initiative funding - £50,000
• Additional Anti-Social Behaviour Measures - £39,000
• Maintaining our housing stick database - £6,000
• Fire Sprinkler Systems - £2,000
• Continued funding for Digital, Financial & Social Inclusion Projects with partners Lead Scotland and Citizens Advice Bureau
• Increased corporate recharges to Housing Service - £85,000.

And also: 

• Buy Back Funding of £20million over 5 years to purchase approximately 40 ex-Council properties per year to boost our housing stock

Average weekly rent increase:

• Bedsit £3.09
• 1 Bedroom £4.20
• 2 Bedroom £4.57
• 3 Bedroom £5.13
• 4+ bedroom £5.47

Option 2 - A rent Increase of 6.25%

This would pay for:

• Fixed cost increases
• Pressures as per Option 1
• Buy Back Funding of £22.5million over 5 years to purchase approximately 45 ex-Council properties per year to boost our housing stock.

Additional money for:

• Additional Trades staff to support the introduction of an evening and weekend appointment system for our Repairs Service - £45,000
• Increased funding for Internet of Things environmental sensor project to increase the number of tenants participating - £28,000.

Average weekly rent increase:

• Bedsit £3.22
• 1 Bedroom £4.38
• 2 Bedroom £4.76
• 3 Bedroom £5.34
• 4+ bedroom £5.70

Option 3 - A rent Increase of 6.5%

This would pay for:

• Fixed cost increases
• Pressures as per option 1
• Buy Back Funding of £25million over 5 years to purchase approximately 50 ex-Council properties per year to boost our housing stock

 Additional pressures included for:

• More Trades Staff to support the introduction of an evening and weekend appointment system for our Repairs Service - £90,000
• Increased funding for Internet of Things environmental sensors project, to increase the number of tenants participating - £56,000

Average weekly rent increase:

• Bedsit £3.35
• 1 Bedroom £4.55
• 2 Bedroom £4.95
• 3 Bedroom £5.56
• 4+ bedroom £5.92

Affordability

As always, it is important that we consider the impact of any increase on our average rent levels and how affordable these are for current and future tenants. The table below compares the new average rent level to other social housing providers in the area and neighbouring Councils. You can see that average rents would continue to be lower for each of the options. We are also confident that with any of the increases proposed, we will continue to remain one of the lowest Local Authority rents nationally.

To determine the potential impact of rent levels against other Scottish local authorities, a comparison has been made to highlight where Perth & Kinross would sit based on a rent increase of 6%, 6.25% and 6.5%. We currently have the 4th lowest average rent in Scotland.

This assumes that other local authorities would increase their rent levels by the same amount they did in 2023-24.

Based on this assumption and the options contained within this briefing, the estimated rent position for Perth & Kinross would be:

• Option 1: 6.0% - 5th lowest rent
• Option 2: 6.25% - 6^th lowest rent
• Option 3: 6.5% - 7th lowest rent

We have a range of practical help and support in place for tenants who find that they are struggling to pay their rent. We have dedicated staff who can make sure income is maximised and that tenants are receiving all the benefits that you should be. We also work in partnership with Perth Citizens' Advice Bureau to provide financial support to tenants. If any tenant feels like they need some help they should call our staff on 01738 476000 (option 2).

Next Steps

All current tenants will receive a Rent Options Consultation form through the post by 31 October 2023 providing an overview of the proposals including the impact on housing services and affordability. Feedback will be gathered on tenants' preferred option via mailed returns and through the Council's online Consultation Hub.

Tenants will be encouraged to participate in the consultation through the tenants' social media channels, our website, text messaging and email, as well as face-to-face and over the telephone by Housing staff. There is also information about the consultation in the Autumn 2023 edition of On The House magazine being sent to every tenant household this month.

The final feedback from tenants will be included in a Committee report which will be considered by members of the Housing and Social Wellbeing Committee in early 2024, when a final decision will be made by elected members.

If you would like any further information, please contact Steven Coyle by emailing SCoyle@pkc.gov.uk