Elected Member Briefing - Service charges to recover the costs of communal heating and lighting

About this Briefing Note

Report by: Elaine Ritchie, Senior Service Manager, Housing

EMBN Number:  002-24

Date: 17 January 2024

Subject: Service charges to recover the costs of communal heating and lighting

Responsible Officer: Steven Coyle, Finance Team Leader

Details

Purpose

The note provides you with further information on increased communal service charges for tenants and residents living in blocks and sheltered housing complexes to recover the cost of heating/lighting. It also outlines what we plan to do to support people as a result. Information on service charge increases was provided to elected members at the Affordable Housing MOWG on 27 September 2023, and at an Elected Member Briefing Session held on 11 December 2023.

Briefing Information

Background

The Council owns and manages 8,021 council tenancies. Each year, we review service charges to tenants and private owners in our blocks (Market, Milne, Lickley, Potterhill, Pomarium) for communal heating, lighting, and caretaking services.

Some tenants in sheltered housing are also subject to a service charge to recover the cost of communal heating and lighting in their complex.

Out of the 8,021 tenancies, these charges only affect around 300 tenants. As such, we have a duty to recover these costs in full so that tenants living out with communal blocks/sheltered housing do not unfairly bear that cost. This approach ensures fairness and equality across all our tenancies.

These charges are based on what the Council has paid for energy costs over the previous full financial year, which we then recover through the service charge for the next 12 months.

The energy provided to these properties are part of the commercial contract that the Council procures through the Scottish Procurement Framework Although tenants and residents have no choice of energy provider, the cost per unit of energy during financial year 2022/23 for the Council contract was significantly lower than the energy price cap that domestic households were paying.

Importantly, service charge costs are not linked to any agreed rent increase.

Increases to energy costs in 2022/23

As you will be aware, at the end of 2022 and into 2023 energy costs increased significantly nationally.

As the service charges people pay are based on energy prices for the previous full financial year, charges to tenants and owners from April 2023 would not take into account the significant increases in energy prices that everyone was experiencing at that time.

We were aware that, as a result, tenants and residents would face a significant increase in service charge costs in April 2024, which are based on the energy costs from 1 April 2022 to 31 March 2023.

We are committed, and have a duty, to consult with tenants and residents on important decisions that affect them. To give people the opportunity to help limit the significant increase from April 2023 and onwards, we consulted with the 300 relevant tenants and residents in November 2022. People were able to respond through a paper survey that was sent to every relevant household, or via an online consultation.

The options that we consulted on were:

• Option 1 - Implement 2023 service charges based on what the Council spent on communal heating and lighting the previous year as normal, which would have seen a slight reduction in charges.
• Option 2 - Leave the charges the same for 2023, which would help to slightly reduce the 2024 increase.
• Option 3 - Increase charges for 2023 by 10% to help limit the increase in 2024.

Out of the 300 tenants and residents consulted, a total of 136 people responded to the consultation, with the outcome as follows:

• Option 1 - 4%
• Option 2 - 65%
• Option 3 - 31%

This choice, which was agreed by Housing and Social Wellbeing Committee in January 2023 and implemented, meant that people would still experience a significant increase in energy costs in April 2024.

Service charge costs for 2024/25

The proposed charges from April 2024 based on the cost of energy used from 1 April2022 to 31 March 2023 are detailed in the table below:

Given the significant increase for some of the tenants and residents that pay the service charges, individual letters have been sent to all outlining the service charges for 2024.

To date, we have had contact from two tenants - one expressing concerns at the level of increase they face and another about the timing of our engagement and awareness of this increase.

Support and Assistance for tenants

The Housing Management Team has considered again if the increases could be phased in for tenants and residents. However, this would go against the wishes of people who responded to the consultation in 2023 and would be increasingly complex to implement at this stage. Any phased approach could also have a further negative impact on tenants if charges were to rise again.

However, we are acutely aware that some tenants and residents are struggling with the cost-of-living. In line with ongoing work with residents who may face financial difficulties, we have implemented a programme of engagement activities to provide support and assistance for anyone who requires it.

These include:

• individual meetings with tenants.
• engagement / awareness events, including evening events to ensure as wide a range of opportunities as possible.
• drop-in sessions by our Welfare Rights Team to ensure peoples' income is maximised.
• support session provided by the Citizens Advice Bureau to provide independent advice and financial support.

Many of the tenants within our sheltered housing complexes will also be entitled to financial support through the winter fuel payment and warm home discount, which can provide up to £750 per household. There is also further financial assistance available to all tenants through winter heating payment and home heating support fund. Support to access these funds and payments will continue to be made to all tenants and residents during the engagement period and after.

Going forward, we will look at actions that can be taken so that tenants and residents are not vulnerable to significant energy cost increases in future.

We are progressing and exploring:

• the issuing of quarterly bills instead of an annual bill given the introduction of smart meters, to spread the charge over a period of time.
• heating system options for Market, Milne and Lickley Court as part of the multi-storey refurbishment programme.
• a review of communal heating as part of our wider review of housing for older people.

If you require any further information, please contact Elaine Ritchie by emailing ERitchie@pkc.gov.uk