Issue - meetings

Housing Portfolio

To consider report DCE/11 of the Deputy Chief Executive, which was referred to the meeting of the Overview and Scrutiny Commission held on 22 November 2021.

RESOLVED

That the Cabinet:

a)         notes the reasons behind, and the actions being taken to rectify, the rent overcharge

b)         endorses that Full Council makes the necessary financial provision for both for the refund of rent and the lower income anticipated within the Housing Revenue Account in both the current and future years.

The Cabinet recommends to Full Council to

a)         Note and comment on the reasons behind, and the actions being taken to rectify, the rent overcharge.

b)         Agree the necessary financial provision for both for the refund of rent and the lower income anticipated within the Housing Revenue Account in both the current and future years.  The cost in the current and future financial years will result in less resource to fund future housing.

e)         Note that the cost of the refunds made to tenants/DWP will impact in the current financial year the sum that will be transferred to the major repairs reserve for investment in future housing stock. This will be in reported in the Quarter 3 Budget Monitoring Report.

Reasons for the Recommendations

a)         In April 2021 the Council was contacted by the Regulator for Social Housing following a first mandatory data return about the setting of target rents. The Council was identified as an outlier in that its target rents were higher than the Government’s formula rent and valuations suggested they should be.

b)         Forensic investigation identified that the issue dates back to changes to the Tenancy Agreement agreed in October 2013 and implemented in April 2014. One of the changes implemented was to move from charging rent based on a 48-week year to a 52-week year. Actual rents were changed but the target rents on the system were not. This has affected 2,259 tenancies, of which 1,757 are current tenancies.

c)         Existing tenancies were not affected by this change, and neither have new tenancies within properties built since April 2014. New tenancies since April 2014 within properties that pre-date April 2014 have consequently been overcharged in the region of 8%.

d)         Tenants have paid the rent they would have signed up to pay as part of their Tenancy Agreement, but that rent level was set higher than it ought to have been. Given that rents have been set as part of a valid Tenancy Agreement and that all subsequent actions have been taken in line with that Tenancy Agreement, the Council has acted legally throughout.

e)         The Leader and Cabinet Member were informed at the end of April 2021 and were clear that this needed to be resolved consistent with natural justice and transparency, and as quickly as possible. The Leader of the Opposition Group was also informed and agreed this needed to be resolved in a way that had the least possible impact on residents, and that wider communication should be at a time when the Council was ready to rectify the problem.

f)          Given the scale and complexity of the issue it has taken a number of months to put everything in  ...  view the full decision text for item 9

The Cabinet Member for Housing presented report DCE/11of the Deputy Chief Executive.  The report considered the reasons behind the rental overcharge, the actions being taken to rectify this and the associated financial impact; and requested that Full Council approved the necessary financial changes. 

Councillor T Belben presented the Overview and Scrutiny Commission’s comments on the report to the Cabinet following consideration of the matter at its meeting on 22 November 2021, which included emphasising the Commission’s support for the approach taken to deal with the error, by doing the ‘right thing’ in repaying tenants and ensuring consistency with natural justice and transparency. It was noted that the Commission scrutinised the reasons behind the error and were comfortable that it should not be possible for such an incident to occur again.

Councillor Crow was invited to speak to the item, and he acknowledged that the Council has handled the communication well and hoped that the checks and balances were now in place.

Councillors C Mullins, Jones, Lamb and Irvine spoke as part of the discussion on the report.

RESOLVED

That the Cabinet:

a)         notes the reasons behind, and the actions being taken to rectify, the rent overcharge

b)         endorses that Full Council makes the necessary financial provision for both for the refund of rent and the lower income anticipated within the Housing Revenue Account in both the current and future years.

The Cabinet recommends to Full Council to

a)         Note and comment on the reasons behind, and the actions being taken to rectify, the rent overcharge.

b)         Agree the necessary financial provision for both for the refund of rent and the lower income anticipated within the Housing Revenue Account in both the current and future years.  The cost in the current and future financial years will result in less resource to fund future housing.

e)         Note that the cost of the refunds made to tenants/DWP will impact in the current financial year the sum that will be transferred to the major repairs reserve for investment in future housing stock. This will be in reported in the Quarter 3 Budget Monitoring Report.

Reasons for the Recommendations

a)         In April 2021 the Council was contacted by the Regulator for Social Housing following a first mandatory data return about the setting of target rents. The Council was identified as an outlier in that its target rents were higher than the Government’s formula rent and valuations suggested they should be.

b)         Forensic investigation identified that the issue dates back to changes to the Tenancy Agreement agreed in October 2013 and implemented in April 2014. One of the changes implemented was to move from charging rent based on a 48-week year to a 52-week year. Actual rents were changed but the target rents on the system were not. This has affected 2,259 tenancies, of which 1,757 are current tenancies.

c)         Existing tenancies were not affected by this change, and neither have new tenancies within properties built since April 2014. New tenancies since April  ...  view the full minutes text for item 9

To consider report DCE/11 of the Deputy Chief Executive.

The Commission considered report DCE/11 of the Deputy Chief Executive. The report considered the reasons behind the rental overcharge, the actions being taken to rectify this and the associated financial impact; and requested that Full Council approved the necessary financial changes.

During the discussion with the Cabinet Member for Housing, Chief Executive and Head of Corporate Finance, Councillors made the following comments:

·         Acknowledgement that the report documented a historical error with regards to tenants’ rents, reasons and rectification.

·         Important that the council was seen to be doing the ‘right thing’ in repaying tenants and to ensure consistency with natural justice and transparency.

·         Recognition that the analysis process was significant and complex along with the process for rectification for the teams involved, not just for the council but external organisations.

·         By rightly applying the principles of natural justice there was a return of the money that has been overcharged, placing the financial impact at ‘status quo’, but it was noted that there was a financial impact in terms of resource analysis of the data and that required to rectify the issue which should be made open and transparent. It was subsequently confirmed that costs were borne out of existing hours.

·         Acknowledgement that the implementation of the policy seemed simple (48 to 52 weeks) compared to the cost of the resolution which appeared overly complicated.  It was important to learn how to avoid similar situations in the future as it was noted the Regulator for Social Housing contacted the council following its first mandatory data return.

·         Acknowledgement that the change was made by dividing the existing rent by 52 and then multiplying by 48.  Actual rents were changed but the target rents on the system were not. Confirmation that the information was now fed into the housing system. 

·         It was queried whether the rent charging may not have been consistent with the decision taken in October 2013.  However that decision reflected the 52 week charge for actual rent and it was noted the targeted rent was set by central government. 

·         Recognition that the Council actively monitored actual rents received versus the level forecast and regularly checked and sought reasons for variances. The year that the decision was made the council had 101 RTB properties. The Council budgeted for a similar level the following year (the first year of the new 52 week rent), however sold 66. When completing the budget monitoring the rental income was higher than anticipated but at the time this was put that down to having more properties paying rent than anticipated.

·         Confirmation that the costs would come from the HRA once the process was complete. The budget would be adjusted next year and be reflected in the quarter 3 budget monitoring report.

·         It was noted that existing tenancies would not affected by this change, and neither were new tenancies within properties built since April 2014. Reconciliation had taken place for the current rent to ensure they were correct.

·         Confirmation that rent credit would be transferred into rent accounts  ...  view the full minutes text for item 7