Agenda item

Impact of the removal of the Housing Revenue Account (HRA) borrowing cap

Special Circumstances Justifying Urgent Consideration


The Chair is of the opinion that although these reports had not been available for at least five clear days before the meeting, nonetheless it should be considered at the meeting on the 13 December, 2018.


(All Wards)


Contact for Information: Tom Tyson, Strategy and Intelligence Manager, 0207 926 3544,



Special Circumstances Justifying Urgent Consideration


The Chair is of the opinion that although this report had not been available for at least five clear days before the meeting, nonetheless it should be considered at the meeting on the 13 December 2018.


Councillor Matthew Bennett, Cabinet Member for Planning, Investment and New Homes, introduced the report by highlighting the following:

·         He was pleased that a cap on borrowing within the Housing Revenue Account (HRA) no longer existed.  However, this was only part of the picture and issues existed pertaining to grants, capacity and land. 

·         He intended to focus on three main areas which he felt would be of interest to the Committee:

1.      Whether lifting of the borrowing cap changed the assumptions on affordability of refurbishment on estate regeneration that had been put forward by the Council?


The Council had borrowed significant money through the HRA to fund refurbishment with a peak debt of £398.5m and before the HRA borrowing cap was abolished the figure stood at £408m.  The funding enabled the Council to invest £500m+ into Lambeth’s housing standard over the past few years that improved the quality of housing within the borough despite the significant reduction in grant funding.


The Council had anticipated a Decent Homes Grant (DHG) of £205m but this had been reduced to £123m.  It was noted that Lambeth had not received a grant for housing to fund the Decent Homes Programme, which resulted in the high deficit.  Although a 1% annual reduction in council rents had been introduced in 2015, it had been made to reduce the government’s housing benefit system.  Therefore, £28m had been taken out of the HRA over four years which could have been invested into carrying out further housing repairs and would have enabled the Council to borrow more money.


Additional demands on the HRA had occurred pertaining to the additional fire safety works carried out on estates as a result of the Grenfell Tower disaster in 2017. 


The Council, as a result of the funding gap, had limited funds available which left the Council in a difficult position pertaining to the HRA.


2.      As a consequence would that have changed the fundamental decisions that were made to rebuild those estates?


The decisions would remain the same as it did not address the fundamental point that the Council could not no longer afford to carry out refurbishments on the estates included in the regeneration programme. 




It was noted that in 2013/14 18,000 households were on the Council’s housing waiting list.  During the past four years, it had increased to 28,000.  Also, 2,000 residents were homeless, including 5,000 children that remained in temporary accommodation provided by Lambeth, which was costly.   Therefore, permanent homes for those families were required.  As a result of the Lollard Street regeneration scheme provided by Homes for Lambeth, 70 new homes in Kennington were expected to be completed in early 2019.  


3.      With the estate regeneration going ahead what would be the consequences for Homes for Lambeth a company established by the Council?


Considerable work had been undertaken during the past four years to ensure that Homes for Lambeth (HfL) would be solely owned and managed by the Council.  


In order to deliver and build many homes quickly, it was recognized that a wider range of new affordable homes at social rent, intermediate rent and shared ownership for key workers were required.  It was felt that HfL would be able to deliver this in terms of estate regeneration.


Opportunities also existed for the Council to borrow from the HRA to build housing on smaller sites as opposed to the HfL.


The Chair invited OSC members to pose questions and in response, Councillor Matthew Bennett, Cabinet Member for Planning, Investment and New Homes, and the Director for Finance and Property, confirmed that:

·         The HRA ran on a 30 year business plan which was frequently remodelled (for example, when priorities were lost under right to buy).  At the end of the Lambeth Housing Standard, the Council was required to invest £30m annually to ensure those homes were maintained to the required standard.  However, resources did not exist to do more, particularly in light of additional fire risk works.

·         A minimum of 27 social housing properties and not 13 were being proposed for Cressingham Gardens and the architects had been advised to consider increasing this.  Therefore, it was expected that more than 27 affordable homes would be available once the scheme had been completed.

·         Consultation regarding major regeneration schemes was carried out in a number of ways over a long period of engagement with residents. Independent organisations were often used.

·         The HfL was fully funded by the Public Works Loan Board and it was within HfL’s gift to make the right ethical decisions regarding its borrowing plans.

·         The Council had borrowed £398m to invest in housing but the opportunity existed for additional borrowing when further homes were developed.  However, extra grant funding from the mayor and private receipts from the GLA would be received by the Council.

·         As a result of the HRA deficit homes would only be built through HfL but opportunities existed to building on smaller sites.

·         The Director for Finance Property endeavoured to provide further information regarding the income that would be made over a particular period from HfL versus debt repayments.

·         The key issue was prudence and being able to afford to repay any debt incurred. It was noted that current interest payments amounted to 16% of total rental income.


The Chair suggested that the HfL business plan should be circulated to the Committee.  In response, the Cabinet Member explained that the business plan would was public document that was also consider by Cabinet.




1.         To request that the Homes for Lambeth business plan be circulated to the Committee.


2.         To urge Homes for Lambeth to prioritise ethical considerations when deciding its future borrowing plans.




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