Preparing for self financing

1. Preparing for self financing Steve Partridge Director CIH and ConsultCIH

2. Not long left… • A major transaction involving many thousands of stakeholders • Officers from housing, housing finance and corporate finance • Members, ALMO board members • Tenants and residents • Progress since February: what’s hot and what’s not • Key areas for a few thoughts • The next big task: bringing the business plan and funding plans together

3. On the ground… the positives • Majority of LAs and ALMOs now have a model in place • For the majority, a positive business plan with revenue headroom • For the majority, some capital/borrowing headroom • £3 billion + in 149 authorities • £2 billion focused into 24 authorities • Moving from modelling to business planning • Thinking through resource prioritisation • Understanding the key decisions • Establishing new governance structures • Talking to tenants – building capacity for empowerment • Extending analysis of their asset base -> Asset Management Strategy

4. Thinking through resource prioritisation • For all, an increased revenue headroom from two sources • Increased allowances, in particular increased major repairs finance • Growing headroom as rents are retained locally not nationalised • Key in thinking through how you set up the plan – balance priorities • Investment in service delivery • Increased capital programme driven by increased MRA – at the very least • Headroom for investment in higher standards, regeneration • New build • The extra £ could go a long way but can only be spent once • Short, term and medium term – timetable to the autumn

5. Understanding key decisions • Resource prioritisation … yes • But key decisions of corporate financial policy • Policy towards… use of borrowing headroom – does that have an impact on the type of borrowing and debt that is taken out? • Policy towards… the use of RTB receipts – how much goes to the HRA? • Policy towards… rent convergence – do you quicken to 2016? • Policy towards… the building of reserves… or the repayment of debt? • Policy towards… efficiency and value for money – and how do the proceeds get recycled to HRA priorities?

6. On the ground… challenges • RTB receipts pooling continues to run against localism ethos • With risks for the future plan if not controlled effectively through policies from the outset • For a significant number, not the majority, a tight plan with continued shortfalls of investment against backlogs • Decent homes funding pegged back • Borrowing cap too tightly drawn • Difficult and challenging stock • If it doesn’t stack up, that’s not because of self financing… • But it is a real and practical issue for some • Options for private finance and other means being explored

7. Building a business plan VISION & MISSION Governance & Risk Strategy Tenant Empowerment • Wherever you are and however your plans looks, a model and a summary narrative by the autumn… • Much of this is already in place – what new needs creating? Treasury Management Service standards FINANCIAL PLAN Value for Money strategy Debt and financing Repairs policies Rents policy: > flexibility? ASSET MANAGE- MENT Refurb - standard Regeneration redevelopment Climate change New build?

8. Four key areas for development • Governance and empowerment • How will tenants be involved? • What structures are needed to oversee the plan? • Empowering (building capacity for) tenants and members • Who needs a seat at the table? • Service delivery • Much already in place – linking to local offers • Value for money and efficiency becomes real cash for reinvestment • Summary of plans – ensuring the plan has the right numbers in it

9. Four key areas for development • Asset Management • Probably the subject of a completely new and long term strategy in time • What assets will you refurbish? To what standard? • What assets will you regenerate and redevelop? And how? • How will you read in the green agenda? • Do you / can you build – with or without HCA grant? • Financial planning - the ‘really new’ bit • A Treasury Management strategy for the HRA loans pool – long not short term • The potential for more rent flexibility – within the framework of convergence? • Debt and reserves management – the FINANCIAL PLAN

10. Bringing it all together • There will be a time when the Business Plan and the Treasury Management/Debt Structure come together… • Borrowing for the settlement • Borrowing in the first few years – and the nature of that borrowing • What will your strategy be? • To repay debt – no need, in fact leaves future capacity under-utilised • To fix debt for 25 years – does this leave enough opportunities to reinvest? • Or combinations – the key watch word might be… FLEXIBILITY

11. From managed decline to dynamic future… • Even if there were no additional resources and no growing headroom, self financing would offer major opportunities for efficiency and progress • How would you characterise your council housing over the last 25 years? • What story can we start to tell for the future… • Dynamic growth • An increasing contribution to meeting the housing needs of residents • A diversifying product and service in partnership with other providers

12. And finally… • For those quiet times surfing the net… a joint CIPFA and CIH initiative www.hraselffinancing.org.uk