Housing Revenue Account (HRA) Business Plan 2025 to 2055
HRA Financial Plan
5.1 The Financial Plan shows how both the Council Housing Investment Programme and the day-to-day council housing services will be funded.
5.2 Overall, the revised HRA plan is fully costed and does not breach a minimum £3 million balance during the life of the plan (30 years). However, to incorporate the cost pressures and anticipated capital investment, including new social housing stock, borrowing will need to rise significantly above the current levels.
5.3 A copy of the HRA Operating Account 2025/26 to 2054/55 is attached at Appendix 1.
5.4 The plan requires, as a minimum, savings of £1.5 million, delivery of the current planned 2025/26 budget, and savings which will be expected to accrue from the link to the reduction in stock numbers.
5.5 The capital investment included in the 30-year plan is £1.448 billion, the split of which is detailed in the following graph:
5.6 A summary of the planned five-year 2024/25-2028/29 capital programme is shown in Appendix 2.
5.7 Borrowing requirement
5.7.1 The proposed plan shows that by year 30 borrowing will increase to £461.044 million, which is £115.539 million higher than the current underlying loan debt. Additional borrowing will be required in 2026/27.
5.7.2 Whilst the borrowing is affordable within the context of maintaining a balanced HRA with a minimum reserve balance, debt needs to be managed in the overall context of affordability for the council. The risks associated with borrowing, including the interest cover, will therefore need to be kept under review.
5.8 HRA reserve balances
5.8.1 The HRA can budget for a deficit in a particular year, but the HRA total reserve balance must not be negative. The business plan is set to assume that if the assumptions resulted in the reserve balance falling below the minimum required of £3 million in any year, then borrowing will be required. Borrowing can only be for capital purposes. Where revenue reserves are exhausted due to revenue expenditure exceeding income, then mitigating action is required.
5.8.2 The plan shows that over 30 years, the surplus carried forwards stays above the minimum balance.
5.8.3 The plan also shows that there are years where reserves will be used to fund predicted peaks in the capital programme due to lifecycle replacements. This minimises borrowing and reduces the level of interest charges that would be incurred.
5.9 Key assumptions
5.9.1 The financial plan is based on several key assumptions to mitigate against risks or changes that may occur over the life of the Business Plan.
5.9.2 The assumptions used for the next five years over the medium-term period 2026/27 to 2030/31 are outlined in the table below. As the HRA plan is over 30 years, future assumptions have been made in respect of the key items listed.
Assumptions | 2026/27 | 2027/28 | 2028/29 | 2029/30 | 2030/31 |
CPI | 3.7% | 2% | 2% | 2% | 2% |
RPI | 4.7% | 2% | 2% | 2% | 2% |
Rent increase | 4.7% | 3% | 3% | 3% | 3% |
Service charges | 4.7% | 3% | 3% | 3% | 3% |
Pay inflation | 3.7% | 2% | 2% | 2% | 2% |
Repairs and maintenance - non staff costs | 4.7% | 2% | 2% | 2% | 2% |
Supervision and management - non staff costs | 4.7% | 2% | 2% | 2% | 2% |
Capital works costs - except certain fixed elements | 4.7% | 2% | 2% | 2% | 2% |
Void rates | 2% | 1.5% | 1.5% | 1.5% | 1.5% |
Bad debt rates | 0.95% | 0.95% | 0.95% | 0.95% | 0.95% |
Interest rates on borrowing | 4.7% | 4.75% | 4.45% | 4.45% | 4.45% |
Additional borrowing required | £11.432m | £28.406m | £24.615m | £26.937m | £12.750m |
Opening stock numbers | 17,688 | 17,603 | 17,478 | 17,435 | 17,370 |
Right to Buy sales | 90 | 90 | 90 | 75 | 75 |
Number of development units | 34 | 37 | 126 | 102 | 178 |
Units lost for demolition | 29 | 72 | 79 | 92 | 0 |
| Area of Business Plan | Comments | Assumptions | Risk |
| Stock numbers | The number of dwellings drives the level of income and costs which vary with the number of properties. This includes Right to Buy numbers, demolitions, remodelling of stock and new developments. | Proposed numbers are as outlined in table 1 above. | There is a risk that Right to Buy applications vary and or there are barriers to new development resulting in a variation to the stock base. Any variation will impact both income and costs. |
| Inflation CPI/RPI | CPI annual inflation for August 2025 3.8% (the same as July 2025) and RPI of 4.6%. OBR forecasts for future years predict CPI at 3.7% (Q3 2025) for 2026/27 3.7% moving to average 2% over future years. RPI assumed to be in line with CPI Inflation - Office for Budget Responsibility | CPI and RPI rates have been taken for each year as shown in table 1 above. May need to revisit RPI assumption. | Inflation has been more stable and forecast corelate with actual position. OBR are the best estimates to hand however this will be kept under review. CPI impacts on both costs and income. |
| Minimum working balance | The HRA has an agreed minimum balance requirement to ensure there is adequate reserves cover. | £3m assumed throughout the plan | There is a risk that this is insufficient and there are unforeseen events that cannot be met. |
| Salary increases (pay award) | This cost pressure relates to the cost of pay award agreed for employees of the council as well as agreed pay increments. Local Authority pay awards are determined through the national bargaining process rather than being mandated by Government. However, the messaging and government resource allocations for the future are likely to influence that national bargaining process. | CPI used for the duration of the plan. | Pay increases which are agreed could be much higher than expected. The uplift for 2025/26 is in line with current levels of inflation but much higher than forecast used in budgeting with is Q3 of the current year (this was 1.65% at the last annual refresh) Alternative scenarios can be run regarding pay. There may be some crossover with the job evaluation cost pressure. Contingency of £3m maintained which includes meeting the cost of the pay award. |
| Revenue repairs | Continued pressure in this area 2024/25 £0.971m overspend and forecast for 2025/26 £0.774m overspend on repairs. This is reflected in the business plan but is unsustainable. | Inflation assumption using RPI. | There is a risk that the void work cost and turnover rate does not enable delivery within budget. There is also a balance between void loss and cost of repairs and timing of major estate works. Significant capitalisation of works in 2025/26 assumed which is not forecast beyond this in the plan. |
| Rent increases | Rent policy is CPI + 1%. | CPI is forecast to be 3.7% and therefore CPI+1% is assumed in the business plan. Given the new policy from 1 April 2026, CPI+1% is assumed for the next 10 years.
Assumed rent convergence in 2026/27 at maximum of £2 | There is a risk of Government intervention and a cap on rent increases lower than presumed in the plan.
Risk that convergence is set at £1 maximum and applies from 2027/28. |
| Service charge increases | Charges are based on full cost recovery however impact assessments are completed, and stepped charges applied where appropriate. Service charge increases should be broadly comparable to rent increases although this does not preclude full cost recovery. | For the purposes of financial modelling, charges have been increased in line with rent assumptions. | Assumed that service charges align to rents, but this creates a small disparity between cost inflation and service charge inflation. |
| Void rates | Void rates vary depending upon the stock and within the plan for modelling purposes the stock has been divided to enable different void rates to be applied. This is most important for those subject to demolition or remodelling where void rates will increase as they are decanted. | Void rates used in the plan are outlined in table 1 above. The current void loss (to week 17) is 3.34% against a budget of 2.5%. | There is a risk that void rates increase in areas where properties are more difficult to let or are unachievable and this will impact the level of income. |
| Bad debt rate | This is the value of the increase required to maintain the bad debt provision at an adequate level. Increasing current debt will have little impact as the debt profiling increases the risk of it becoming uncollectable with age. | Bad debt rates used in the plan are outlined in table 1 above. The 2024/25 actual was 1.27% - whilst this is higher than planned it is linked to the lower rent due to void loss and level of 2024/25 debt write off. | Income collection rates decrease but there is a lag in the impact on the provision due to the methodology used in maintaining the provision. |
| Other income | Non dwelling rents such as garages have experienced a reduction in demand and for the purposes of financial modelling have been maintained at the current budget for the life of the plan. The stock loss over the plan does not directly vary other income so this has been managed through inflation. | Non dwelling rent not inflated Water Commission linked to RPI this may be impacted in the stock loss. | Positive risk that non-dwelling rents can be increased without impacting demand. |
| Capital receipts | The income from Right to Buy receipts can be used to fund redevelopment. There is an accumulated reserve of £22.3m which is estimated to be used over the next 2 years. Receipts received in year will be used to fund the capital programme. The policy changes to RTB receipts and their use has a direct impact on resources available to fund the capital programme out with the development schemes. However attributable debt allowance still able to be used for any capital purpose assumptions in plan still generate an amount for this. Receipts retained for development previously could not be combined with grant and need to be used within five years, but this will be extended to 10 years and from 2026/27 can combine receipts and grant. | Current average RTB value £111,392 (current 2025/26). Projected to increase with CPI. Beyond year seven there is no further development planned despite 1-4-1 receipts being generated or needing to be used from prior years. If the receipts are not used, they must be repaid with interest and therefore an adjustment has been made in the plan to ensure the plan does not need to fund the interest but there would be a need to plan to use or gift to another registered provider. | The sales are higher or lower than modelled which could impact the amount available to fund the capital programme. The Government change the parameters in the Right to Buy calculation impacting the level of receipts. |
| Homes England Grant Funding | It is assumed new developments will attract funding. The council has a good track recorded of securing Homes England Funding. | £50,000 per property assumed together with an affordable rent but grant levels may be much higher but requiring a social rent to be charged. | There is a lower value of grant awarded or a positive risk of a higher grant award. |
| Major works | The HRA capital programme is reflective of the agreed 2025/26 programme with slippage from 2024/25 incorporated. Stock condition information has been updated and reflect the most up to date forecasts. | Based on stock condition survey and rise with RPI except for extensive exceptional works such as net zero carbon, aids and adaptations and estate works (non-dwelling works) which are cash limited. Most works vary with the stock numbers which is built into the business plan. | There is a risk that costs increase at a level above the forecast RPI.
There are further risks associated with the Government's relaunching of 'Decent Homes'. This could change the profiling of when capital works are required within the BP. |
| Depreciation | Depreciation is a real cost in the HRA and is used to fund major repairs (capital). In 2024/25 the level of depreciation was £0.922m higher than originally budgeted. At Q1 the 2025/26 was reset to reflect the potential increase in depreciation which has an impact throughout the plan. | Assumed that depreciation follows patterns from prior years. Not directly linked to stock changes. | There is a risk of change in market prices which impact the valuation. There may be an opportunity to consider the depreciation policy and application linked to asset lives as to the ability to reduce the charge. |
| Interest rates on borrowing | Borrowing rates are currently unpredictable. Rates for borrowing take into account the term of the borrowing and therefore rates can vary. | Interest rates for new borrowing for 2025/26 are estimated at 4.7% with future years outlined in table 1 above. | There is a risk interest rates increase further. However, there could be a positive risk of rates reducing for new borrowing. |
| HRA debt | The opening HRA CFR is £345,505m. Each HRA loan is separately identified and debt profiled based on known interest rates. It is assumed that when debt matures it is refinanced. | The level of additional debt accrued over the 30-year plan is £115.539m, which is 13% loan to value against the current value of the stock. |