Agenda item

Housing and Community Services Portfolio Holder – to receive a report (C-042-2020-21) on the Council’s charge for additional services, to tenants living in blocks of flats based on a CPI increase yearly.

(1)          The Cabinet approved the recommendation to increase service charges using an incremental approach.  This followed the review regarding the level of service charges across the district and the requirement to introduce a fair and consistent approach to service charges for tenants living in blocks.

(2)          The Cabinet agreed to limit the increase in year 1 to no more than 40% (maximum £3.50 per week) and 70% in year 2. 

The Housing and Community Services Portfolio Holder, Councillor H Whitbread, introduced the report on Service Charges.

The Council charge for additional services, to tenants living in blocks of flats based on a CPI increase yearly.  An example of these services were the cleaning of blocks and communal utility costs such as electricity for lighting.  EFDC’s charging approach follows the government guidance to separate service charge from rents which took place in 2003.  This approach has become challenging for most organisations over the years as some costs have risen above the rate of CPI.  A recent analysis of cost against income was as follows:

Income - £590,662.40

Income expected based on costs - £1,265,905.77

Short fall against current charges - £675,243.30

Councils were now subject to rent regulations via the Regulator for Social Housing.  The Regulations clearly state that social housing providers need to charge for services in a fair and consistent way which can be accounted for.  This translates to charging the actual cost for the services broken down to each individual property.  From a legal standpoint this protected us from challenge regarding fair and accurate charging.  Service charges were subject to housing payment support for tenants who were in receipt of benefit.  Although it was difficult to be 100% accurate our data indicates that approximately 70% are currently receiving housing payment support, thus the new charges will be covered by the benefit.  It should be noted that the income and expenditure of service charges comes under the Housing Revenue Account.

Officers undertook a large-scale review. The costs of services provided had now been established and applied to each individual property. 

It was proposed that the increase would be implemented using an incremental approach over 3 years.  This would seem fairer, particularly during these unprecedented times. 

Councillor Bedford noted that we needed these increases and that they were long overdue.

Councillor Heap asked if it mattered that we were undercharging. He was told that the Council had to manage its HRA as best as it could. This would bring in more money and therefore improve our estates.

Councillor Jon Whitehouse noted that the tenants had been consulted, but had the leaseholders been consulted. He was told that the leaseholders were already paying the increased charges and although the increases did add up, they were covered by housing benefits.

Councillor Murray said that the methodology behind this seemed all right. He was concerned about the £3.50 increase at this time for people just above the benefits line. Did we know how many tenants would be faced with this large increase a week. Councillor H Whitbread noted that some people would be saving money with this review. As for how many people this affected, she asked Ms Fenton to answer. Ms Fenton said that we were now regulated by the Social Housing Regulator and now had to have fair and transparent charges, at the moment we did not; another reason for undertaking this review. It was about 25% of residents who would be paying this larger amount, and around 200 tenants would be seeing a decrease in their payments.

Councillor Rose Brookes asked why this had not been done before. She was told that they had now taken a close look at our charges, that, and the social housing regulator prompted to ensure that we had the fairest possible regime.

Decision:

(1)          The Cabinet approved the recommendation to increase service charges using an incremental approach.  This followed the review regarding the level of service charges across the district and the requirement to introduce a fair and consistent approach to service charges for tenants living in blocks.

(2)          The Cabinet agreed to limit the increase in year 1 to no more than 40% (maximum £3.50 per week) and 70% in year 2. 

Reasons for Proposed Decision:

The development of a fair and accurate charging regime for service charges supports the overall aspirations of the Councils Corporate Plan – Stronger Communities, Stronger Council. 

Other Options for Action:

Not to develop a fair and accurate charging regime. This would leave us potentially in breach of the newly published Rent Regulations and at risk of legal challenge around fair charging.   Furthermore, if not addressed will add pressure to the HRA.