« Previous | Contents | Next »
Listen
Introduction
Average rents across Scotland are projected to increase in 2006-07 by 4.2%, to £46.65 per week, while average expenditure on managing and maintaining local authority dwelling stock is expected to increase by 5.4%. The main points are summarised below:
- The number of local authority housing properties continues to reduce; the rate of 3% between 2005 and 2006 being consistent with previous years;
- There is a range of £21.12 between the highest and the lowest rents; Inverclyde Council is expected to continue to have the highest rent in Scotland (£57.90) and Moray Council the lowest (£36.78);
- Average management and maintenance expenditure is expected to increase by 5.4% to £1,595 per unit;
- Supervision and management costs (part of management and maintenance) are expected to increase by 6.2% to an average of £582 per unit;
- Repairs and maintenance is reported to be an average of £1,013 per unit, an increase of 4.9% on 2005-06, with North Ayrshire reporting the highest level of expenditure per unit (£1,239) and Orkney Islands the lowest (£690 per unit);
- Housing debt in Scotland continues to reduce, but there is wide variation across local authorities in their levels of debt; Orkney Islands and East Lothian are both debt free, whereas Shetland reports housing debt of £27,248 per unit and City of Edinburgh £11,026;
- Councils with higher than average housing debt also spend proportionately more supporting debt; Shetland continues to report over 80% of rental income supporting debt (and is now the only local authority which qualifies for Housing Support Grant); other local authorities are also spending a significant proportion of rental income supporting debt, including Edinburgh (45%), West Dunbartonshire (44%), Renfrewshire (43%) and Inverclyde (40%);
- Total capital expenditure in 2006-07 is projected to be £493 million, an increase of £66 million (15%) on 2005-06, with Midlothian, Inverclyde and Renfrewshire projecting the highest increases;
- Authorities requiring significant amounts of additional Prudential Borrowing to fund housing investment in 2006-07 include East Lothian, City of Edinburgh, Inverclyde, Midlothian, Renfrewshire and West Dunbartonshire.
1. This report provides information on local authority housing income and expenditure. The principal sources for the data are the annual local authorities' Housing Revenue Account ( HRA) returns submitted to the Scottish Executive (tables 1-9, 12 and 13). Information provided by other sources is recorded in the footnotes. Dumfries & Galloway, Glasgow City and Scottish Borders councils transferred their housing stock in early 2003. Data for these local authorities is no longer included in this bulletin. The figures provided by Comhairle nan Eilean Siar for planned expenditure in 2006-07 only relate to part of the year as the council transferred its housing stock during September 2006. Argyll & Bute, which transferred its housing stock in December 2006 provided figures for planned expenditure for the whole of 2006-07.
Consolidated Income and Expenditure ( tables 1 and 2)
2. Income from local authority rents in 2006-07 is projected to increase by £4 million (or 0.5%) compared with 2005-06. Once cash brought forward is excluded, rents account for 92% of total HRA income in 2005-06 and 2006-07. Taking key expenditure in 2006-07 as a proportion of rental income, repairs and maintenance continues to be the largest item (42%). Loan charges are the next major cost (25%) closely followed by costs of supervision and management (24%). This is consistent with figures for 2005-06.
Stock levels ( table 3)
3. Between September 2005 and September 2006 the number of local authority dwellings fell by 11,072 (excluding transferred stock from Eilean Siar). This represents a reduction of 3.1%, which is broadly the same rate as in recent years. Around four fifths of the decrease is due to right to buy sales to tenants with the remainder accounted for by demolitions.
Rents ( tables 4 and 5)
4. The average local authority rent in Scotland is estimated to be £46.65 per week in 2006-07, an increase of 4.2% on 2005-06 (table 4). There is a range of £21.12 between the highest and the lowest average weekly rent in Scotland. Inverclyde continues to have the highest rent and in 2006-07 it is expected to be £57.90 per week. This is over £4 per week more than the next local authority, City of Edinburgh, which has an average weekly rent of £53.46. For the second year in a row Moray continues to have the lowest rent in Scotland at £36.78 per week.
5. In 2006-07 local authorities estimate that the rent rebate subsidy, which measures housing benefit receipt, will total around £537 million, or 63% of total rental income (table 5).
Management and maintenance ( MM) expenditure ( tables 6, 7 and 8)
6. MM expenditure is made up of expenditure on supervision and management (mainly staffing costs) and the repair and maintenance of the housing stock (table 6). The average MM expenditure of Scottish local authorities in 2006-07 is estimated to be £1,595 per unit. This is an increase of £81 per unit or 5.4% on average MM expenditure in 2005-06. There is a range of £721 between the highest and the lowest projected MM cost in 2006-07 which is a slight narrowing on the 2005-06 range of £804. Dundee has replaced Stirling in 2006-07 as the council with the highest estimated average expenditure at £2,009 per unit and West Dunbartonshire reported the lowest at £1,288. The large (19.5%) projected increase in MM per unit for Dundee between 2005-06 and 2006-07 is mainly explained by an accounting change with the inclusion of expenditure on sheltered housing as part of supervision and management costs within the housing revenue account. Differing accounting practices amongst local authorities, and higher actual costs than original estimates mean that the figures for individual authorities may not always be directly comparable and the estimates for MM expenditure should be regarded with caution.
7. Within overall MM expenditure, average supervision and management ( SM) costs in 2006-07 (table 7) are estimated to be £582 per unit. This is an increase of £34 (6.2%) on average actual SM costs in 2005-06. There is a range of £748 for full year SM costs for 2006-07, and Argyll & Bute has the highest at £989 per unit and the lowest is £243 for the Shetland Islands. Some local authorities have planned increases for 2006-07 which are substantially above the Scottish average, notably Dundee (up by 56% - Dundee was ranked 15 th in 2005-06) and Perth & Kinross (22%). The increase in Dundee is mainly explained by the inclusion for the first time of expenditure on the supervision and management of sheltered housing within the housing revenue account. As local authorities differ in the extent to which central administration and related service costs are included in SM expenditure, individual figures may not always be directly comparable.
8. Average expenditure on repairs and maintenance ( RM) (table 8) is estimated to be £1,013 per house in 2006-07. This is an increase of £47 or 4.9% on the actual cost for 2005/06. The range for full year RM costs is £549 and the highest projected RM expenditure in 2006-07 is in North Ayrshire at £1,239 per house. The lowest full year cost was recorded by Orkney Islands, at £690 per unit. Individual local authorities are estimating increases for 2006-07 which are very much in line with the Scottish average.
Rents lost because of voids ( table 9)
9. Total rents lost due to voids in 2006-07 are projected to be around £23.1 million, or 2.7% of total rental income. This is the same as results for 2005-06. Levels of rent loss may be significantly influenced by a number of factors such as: different levels of demand for properties; different management practices and targets; decanting for improvement and investment programmes; or the inclusion of properties lying empty and awaiting demolition. But there are some noteworthy patterns in the reported figures. Inverclyde and West Dunbartonshire consistently report rents lost in excess of 5% of rental income. Aberdeen is predicting a 50% improvement for 2006-07 compared with previous years. A significant number of local authorities have rent loss figures well below the Scottish average (Aberdeenshire, East Dunbartonshire, East Lothian, Midlothian, Moray, North Ayrshire, Orkney Islands, Perth & Kinross, Stirling and West Lothian).
Rent arrears and rent arrears written off ( tables 10 and 11)
10. Total rent arrears are shown for 2005-06 at £31.3m, these represent 3.7% of standard rental income. This is a very slight improvement on the 3.8% for 2004-05, and the number of current tenants reportedly in arrears has decreased by 5,124 (or 5.1%). Direct comparison between local authorities may not always be meaningful due to differences in how they define arrears and rent write-off, but again there are some findings worth highlighting. Dundee, Stirling and West Dunbartonshire have reported arrears of over 5% in both 2004-05 and 2005-06. This contrasts with East Ayrshire and North Lanarkshire which have consistently reported arrears of under 2% for the same two years. Other local authorities, notably Aberdeen, Comhairle nan Eilean Siar and City of Edinburgh, have also reported above-average rent arrears in the past two years. In what appears to be a response to this, these local authorities have reported writing off higher than average arrears in 2005-06, or have estimated higher than average write-offs for 2006-07.
Housing Revenue Account surpluses ( tables 12 and 13)
11. Housing Revenue Account surpluses have been rising each year between 2003-04 and 2005-06, and are expected to total over £200 million in 2006-07. Some local authorities continue to use surplus revenue income to boost their capital expenditure. Capital funded from current revenue ( CFCR) is estimated to be £97.3 million in 2006-07 and is mainly attributable to Aberdeen City, Fife, North Lanarkshire and South Ayrshire. Revenue balances of £93.8 million are projected to be carried forward into 2007-08. The remaining £13.8m will be transferred into the General and other Reserve Funds.
Capital debt ( table 14)
12. The total HRA debt at 1 April 2006 was estimated to be £1.917 billion, a decrease since 1 April 2005 of £88 million. The average debt per unit is now £5,438. There continues to be a wide disparity between local authorities in their debt. Average debt per unit in Angus, Falkirk, North Lanarkshire, Perth & Kinross, Stirling and West Lothian is less than £3,000, and Midlothian's debt will remain below £500 per unit. This contrasts with Shetland's debt of £27,248 per unit and City of Edinburgh's £11,026. Before transfer, Comhairle nan Eilean Siar was the second-highest indebted authority at £20,577 per unit. East Lothian and Orkney Islands were both debt free at 1 April 2006.
13 Local authorities with higher than average housing debt also estimate spending a higher proportion of their rental income to service it: in 2006-07 Shetland has reported 86%; Edinburgh 45%; West Dunbartonshire 44%; Renfrewshire 43%; Highland 41%; Inverclyde 40% and Dundee 34%. The 2006-07 estimates are only marginally different from the reported 2005-06 actual figures for these authorities.
Capital expenditure ( table 15)
14. Local authorities' total housing capital expenditure financed from all sources (including new borrowing, usable receipts and CFCR) is projected to total £493 million in 2006-07, an increase of £66 million or 15% on 2005-06 figures. This level of increase is consistent with the 17% increase reported in both previous years. Some local authorities have projected major increases during 2006-07 in gross capital expenditure, above the Scottish average. These include Midlothian (118%), Inverclyde (100%), Renfrewshire (62%) and Aberdeen City (27%).
15. Projected capital receipts (see below) only finance part of local authorities' estimated gross capital expenditure (52% in 2006-07). CFCR is expected to finance £97 million (20%) and the balance will need to be funded by new borrowing under the Prudential Regime. Local authorities with major increases in projected capital expenditure requiring significant levels of new borrowing include East Lothian, City of Edinburgh, Inverclyde, Midlothian, Renfrewshire and West Dunbartonshire. These same local authorities are already allocating a high proportion of their rental income to servicing housing debt.
Capital Receipts ( table 16)
16. Total HRA capital receipts are estimated (at March 2006) to amount to £234.6m in 2006-07. This is a reduction of £51 million (or 18%) on actual results for 2005-06. Broadly, local authorities have estimated receipts in line with actual results in the previous three years. A few local authorities have estimated significant reductions in capital receipts - Inverclyde (92%); Angus (66%); East Ayrshire (46%); East Lothian (48%) and South Lanarkshire (28%).
17 Actual capital receipts tend to be higher than first estimated (in 2005-06 a projected decrease of 9% turned into an increase of just under 4%), which indicates an element of 'pessimism bias' in local authorities' financial planning. This may be due to higher than expected right to buy sales in terms of value or volume, or additional receipts from other disposals.
« Previous | Contents | Next »