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REVEALED: Councils' raids on tenant rent accounts

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Councils are drawing millions of pounds from their tenants’ rent account to fund support services for the government’s controversial welfare cuts and prop up their falling budgets.

The social tenant rent raid is revealed by LGC research into 13 councils’ housing revenue account business plans for 2013-14.

These show authorities across England are switching the cost of buildings and services such as libraries, community centres and street lighting from their general funds to the HRA. Almost £5m of these so-called ‘savings’ have been made by just five councils found to be carrying out such transfers.

In the most significant shift, Portsmouth City Council predicts it will save £2.1m from its general fund over the next three years by shifting costs linked to libraries, youth clubs, a community centre and car parks to the HRA.

Barking & Dagenham LBC has loaded an extra £600,000 on to its tenants’ rent account for the street lighting costs for an estate.

Lewisham LBC is drawing an additional £750,000 from the HRA to maintain and replace bulk waste bins. “It is becoming increasingly harder for the service to absorb these costs,” Lewisham papers from February state.

Although councils have suffered savage general fund cuts over the past two years, Whitehall last year handed them control of the HRA, a ringfenced budget largely funded by tenants’ rents. For large landlords, this income now makes up 20% of their spending power.

Nick Haverly, Portsmouth’s housing finance manager, admitted authorities were seeking “creative” ways of using the HRA as general funds diminished.

“That means they will consider the HRA as a way of getting those savings,” he said.

He defended Portsmouth’s decision to transfer the upkeep costs of its library and a community centre to the HRA. Both are not usually considered a legitimate landlord expense. “The library service provided from that building remains a general fund-run service,” he said.

These additional strains on the HRA come as councils start charging the account for support services to help tenants hit by government welfare cuts.

Brent LBC will draw £400,000 from its HRA over the next two years for a new six-strong welfare support team.”The team will work on preparing tenants and staff for the introduction of universal credit and direct payments,” a Brent spokesman told LGC.

John Perry, a policy adviser at the Chartered Institute of Housing, said it was understandable councils were turning to the HRA as general funds came under “tremendous pressure”.

Councils should ensure they adhere to the principle that no tenant should pay twice for a service, he added. “The principle is increasingly important as more tenants are forced to pay at least part of their rent from their earnings, as a result of cuts such as the bedroom tax.”

David Longbottom, a manager at financial advisers Grant Thornton, predicted additional pressures on the HRA would emerge as the effect of the welfare reforms became clear. “Local authorities have to think in terms of how the reforms might affect rent collection and make allowances for additional advice for tenants,” he said.

The imposition of extra charges on the HRA could face resistance from tenants, Mr Longbottom added.

“Tenants might say that bin collection is paid for through council tax. Street lighting is another grey area. Councils have to determine the extent to which communal services are directly related to the HRA estate. It can be a bone of contention,” he said.

Previous LGC research has shown that bad debt provisions linked to welfare reform could suck an extra £100m out of council house building and refurbishment.

Portsmouth City Council - £2.1m

Extra charges over three years for transfer of youth clubs, homeless accommodation, a community centre, two libraries and three car parks

“We are looking at all assets in housing estates not already in the HRA. If a library closes we could convert it into flats”

Barking & Dagenham LBC - £600k

Extra charges over three years for street lighting

“We are not billing social tenants twice. The charge specifically relates to lighting on HRA land”

Brent LBC - £400k

Extra charges over two years for welfare reform team

“Feedback from payments pilots indicates the cost of rent collection will rise significantly”

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Readers' comments (1)

  • Councils like Stevenage BC increased the rents by twice the rate of inflation whilst freezing Council Tax and it seems it is virtually irresistible that councils will raid the HRA to continue to subsidise the CT account in the future, Where are the professional accounting standards that ensure only direct housing costs go into the account?

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