Agenda item

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 place in order to proceed. All members and all affected tenants have been informed and from mid-November steps are being taken to reset the rents at the correct level and to refund all tenancies affected. These steps have been taken under existing delegated powers, but it is important that there is an official record of the steps being taken and the need to make the necessary financial adjustments.

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 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 place in order to proceed. All members and all affected tenants have been informed and from mid-November steps are being taken to reset the rents at the correct level and to refund all tenancies affected. These steps have been taken under existing delegated powers, but it is important that there is an official record of the steps being taken and the need to make the necessary financial adjustments.