Preparing for Self FinancingPreparing for Self FinancingNot Long Left…..Not Long Left…..

Joe Logan

Chief Executive

Poole Housing Partnership

Poole BackgroundPoole Background

5,200 homes ALMO since 2004 Management Agreement expires in March 2014 Achieved Decent Homes December 2010 High housing cost; low wage economy

Stock Options AppraisalStock Options Appraisal

Began in 2009 ALMO brought back in house “not an option” Twin strategic objectives; existing stock and regeneration ALMO retention and Stock Transfer main options Self-financing process intervened Self-financing presents short term funding problems

– Meets needs of existing stock over the 30 year plan but…– Does not support regeneration of existing stock

Poole’s HRA Debt PositionPoole’s HRA Debt Position

Additional Debt Payment to the Government - £44M

£44M

£90M

Headroom - £4M to Govt's assumed Subsidy Debt

£4M

Actual HRA Debt - £42M £42M

£46M

Self Financing Offer as it now standsSelf Financing Offer as it now stands

So…..So…..

5 years’ investment to be spread over 10 years Revenue contributions to capital increased

– Service charges reviewed– Garage rents increased– Efficiency savings

Begin repaying debt at Year 18 Debt could be cleared at Year 29

So, from Year 18, there is the potential to raise capital

Self Financing Offer – Balanced Programme Self Financing Offer – Balanced Programme Work is underway to achieve thisWork is underway to achieve this

Closing the finance gapClosing the finance gap

Reviewing component longevity on Stock Condition database Holding back on a range of planned works Reducing contingency funds Efficiency savings: increased revenue contributions to capital Income from external sources

– Grant funding– Supporting other organisations– Non-housing contracts– Creating new income streams e.g. Feed in tariff

Closing the finance gapClosing the finance gap

Photo-voltaic schemePhoto-voltaic scheme

Reduces fuel poverty Stops 32,500 tons of carbon emissions over 25 years 1,300 PHP homes to be covered Provides local employment Creates a surplus of £15 Million for HRA Purchasing through North Somerset Housing

Steve Drew (steve.drew@nshousing.org.uk)

Steve Drew; Director of Assets Tel: 01275-398020

HRA DEBT POSITIONHRA DEBT POSITION

Additional Debt Payment to the Government - £44M

£44M

£100M

Headroom (Now Borrowed) - £4M to Govt's assumed Subsidy Debt

£4M

Actual HRA Debt (Now includes the £10M borrowed for PV) - £52M

£52M

£56M

A Quality Stock Condition DatabaseA Quality Stock Condition Database

In Poole

Carried out in house Over 50% of stock with full condition survey 98% partial surveys 100% non-housing assets surveyed Periodic external quality control

It needs to be dependable!

Preparing for Self-Financing in PoolePreparing for Self-Financing in Poole

Governance – Joint Council/ALMO Working Party HRA remains managed by ALMO/Resident scrutiny Debt split into General Fund and HRA pools Short term internal borrowing Short, medium and long term loans Depreciation – Using CIPFA Component Accounting Method

What are the main risks?What are the main risks?

The final settlement could be worse than the offer Future above-inflation rent increases Benefits changes and benefits paid direct Right to Buy increases Government ability to open up settlement Building cost inflation Depreciation calculation IFRS/Impairment

Big ChallengesBig Challenges

First 10 years will be tight No opportunity for regeneration Urgent need for more affordable housing Brownfield sites gone Poole’s economy increasingly dependant on affordable housing

What is the NFA doing?What is the NFA doing?

Survey of all ALMOs Sessions on Self Financing at Annual Conference Guidance notes being circulated for ALMOs ALMOs sharing best practice with each other Working with CWAG, LGA, CIH Resident/Board training events Exploring Community Ownerships models

and remember….and remember….

Rent and other income will be the only long-term income resources for the HRA business plan

The first priority: existing debt The second priority: properties are maintained to raise income and cover

debt The third priority: service delivery …and maximising income must also be a priority; rent, service charges,

financial inclusion support for residents, other income streams

and finally…..and finally…..

Self-financing was the sector’s idea.

Enables long term planning.

It is not without challenge, but it is better than the current subsidy system.