Guidance on the operation of Local Authority Housing Revenue Accounts (HRAs) in Scotland

Guidance relating to the role of Housing Revenue Accounts (HRA).


Key principle 4

In addition to the existing statutory obligations, local authorities must have clear, published mechanisms and procedures for discussing with council tenants and/or ( RTOs) any matters of financial transparency relating to the HRA in accordance with outcomes 2 and 3 of the Scottish Social Housing Charter.

Building on advances in tenant participation

98. This guidance acknowledges the existing good practice by Councils to engage with tenants on such HRA matters. However, under the Charter, council tenants must in future be able to obtain clear information from all social landlords on how rent and other money is spent including information on items of expenditure above thresholds agreed between landlords and tenants (Outcome 15). This transparency must be premised upon the notion of regular and meaningful discussions on the level and nature of income credited to and expenditure charged to the HRA. Importantly, this will require the development of clear engagement structures and mandates for this level and type of representative tenant scrutiny.

Legislation regarding tenant participation and consultation

99. All local authority landlords must comply with tenant participation legislation in the same way that they must comply with any other legislation referred to in this Guidance. The statutory basis for tenants becoming involved in decision-making processes of councils (and RSLs) dates back to the Housing (Scotland) Act 2001.

100. Sections 25, 53 and 54 of the Housing (Scotland) Act 2001 provide the statutory basis for tenant consultation in respect of the operation of the HRA. These sections specifically relate to giving notice of an individual's change in rent and service charges; the preparation of a tenant participation strategy covering such important areas as housing management, repairs and maintenance; and the process for consulting on changes in rent levels. Specifically, the legislation says;

Section 25: Notice of increases in rent or service charges to tenants

101. Section 25 requires landlords to give an individual tenant notice of ".....not less than four weeks" before increasing their rents or other charges. Where a landlord proposes a general increase in rents or other charges, it must first consult those individual tenants who would be affected. It must then demonstrate that it has considered the views of those tenants before implementing the increase. In practice, this will mean giving an explanation to tenants for the rent increase and answering the case as to how the increased rent has come about including whether any of the increase was brought about by specific events regarding the proper operation of the HRA in that year.

Section 53: Statutory Requirement for a tenant participation strategy

102. Section 53 requires local authorities and RSLs to have tenant participation strategy in place as directed by the Scottish Ministers. This strategy should set out a number of things including:

  • how the document was developed and who was involved;
  • its aims and objectives;
  • a commitment from senior management to put tenants at the heart of their business activities;
  • the benefits of tenant participation;
  • how to keep tenants informed, consulted, involved and provided with feedback;
  • links to other strategies and services and performance standards;
  • how to work with RTOs;
  • a statement of resources to support effective tenant participation;
  • training provision;
  • a commitment to equal opportunities;
  • and how the strategy will be monitored and reviewed.

103. Section 53 also places a duty on councils to maintain a register of tenant organisations meeting certain criteria. Subsection (4) entitles Scottish Ministers to make an order setting out the criteria for registration or removal from the register and the procedures to be followed in relation to such registration and removal and subsection (5) provides a right of appeal for such groups in relation to registration and de-registration.

Section 54: Consultation with tenants and tenant organisations

104. Section 54 provides for both individual tenants and registered tenant organisations to be consulted by the landlord on issues significantly affecting them. This includes the service standard implications of any proposals concerning the management, repair and maintenance of the stock all of which are HRA functions as outlined in section 4. Subsection (1) requires the landlord to have regard to representations by tenants or tenants groups made within a reasonable timescale. Subsection (2) sets out the relevant proposals to which this applies. This section is particularly important in relation to the HRA as service standards will be strongly dictated by what is and isn't being debited and credited to the HRA.

The Scottish Social Housing Charter

105. The relevance of the Charter to some key HRA outcomes (notably 13, 14 and 15) was discussed in section 4. However, it also has relevance to tenant participation which in turn has relevance to the operation of a transparent HRA.

106. The Charter requires all social landlords in Scotland (both councils and RSLs) to achieve 16 separate outcomes in relation to the performance of each landlord.

Whilst the Charter replaces the previous performance standards set out in November 2006 the guidance that the Scottish Ministers issued under section 79 of the Housing (Scotland) Act 2001, it does not replace any of the legal duties that apply to social landlords. However, in several cases, the outcomes describe the results social landlords should achieve in meeting their legal duties. Outcomes 2 and 3 of the Charter relate to the tenant/landlord relationship in terms of how the HRA might operate. The outcomes every social landlord is expected to achieve in this respect are as follows:

Outcome 2: Communication

107. This outcome states social landlords manage their businesses so that:

"Tenants and other customers find it easy to communicate with their landlord and get the information they need about their landlord, how and why it makes decisions and the services it provides."

108. The Charter goes on to say that:

"This outcome covers all aspects of landlords' communication with tenants and other customers. It is not just about how clearly and effectively a landlord gives information to those who want it. It also covers making it easy for tenants and other customers to make complaints and provide feedback on services, using that information to improve services and performance, and letting people know what they have done in response to complaints and feedback. It does not require landlords to provide legally protected, personal or commercial information."

109. In HRA terms, this means that landlords are obliged under the Charter to give specific information on the operation of the HRA (including breakdowns of cost if required) in their area if it is being sought so long as it is not legally, personally or commercially privileged. This also means that if tenants are not satisfied about the operation of the HRA (for example) they must first lodge a complaint to the Council concerned before taking other action (see section 10).

Outcome 3: Participation

110. This outcome states that social landlords manage their businesses so that:

"Tenants and other customers find it easy to participate in and influence their landlord's decisions at a level they feel comfortable with."

111. The Charter goes on to say that:

"This outcome describes what landlords should achieve by meeting their statutory duties on tenant participation. It covers how social landlords gather and take account of the views and priorities of their tenants; how they shape their services to reflect these views; and how they help tenants and other customers to become more capable of involvement."

112. In HRA terms, this means that councils must take account of council tenants' views and be able to demonstrate that they have taken account of them. This can extend to the way in which the HRA operates if tenants feel it is not operating in accordance with the law, statutory guidance, codes of practice or to their satisfaction. Councils must also be able to demonstrate how they are encouraging tenants to offer their views more readily in future. This includes views on the operation of the HRA and on the use of HRA assets.

Discussions with tenants about the operation of the HRA

113. Landlords should have regular, open discussions with their tenants about financial transparency e.g. this includes what is and isn't being debited and credited to the HRA and whether these individual debits and credits are at levels reflecting the functions of the HRA. These discussions must be based around what is allowable under the legal and accounting frameworks as outlined in section 5. For this reason, the HRA legislation from the 1987 Act (in particular Schedule 15), statutory guidance, codes of practice including the SeRCOP classifications of Service Expenditure Analysis ( SEA) and the annual HRA statistical returns to Scottish Government should provide a number of possible starting points for beginning (or continuing with) those discussions. We have included a series of tables in Appendix 1 which councils and RTOs can use a means of facilitating their discussions on what should and should not be included in HRA costs and incomes.

114. Discussions could take many forms. Initially, councils and tenants might wish to discuss general principles underlying what the HRA should be charged with. Thereafter there could be further dialogue on what is happening in each account and even result in detailed discussion on a"line-by-line" itemisation of costs depending on what councils and tenants agree locally. The point is that engagement with tenants on HRA charges must follow some kind of systematic process that addresses the concerns of tenants on the operation of the HRA, if there are any concerns. In return, tenants must be clear about what their concerns are so that councils can clearly answer any questions they may have.

115. The Charter (outcome 15) also states that as well as the items of expenditure, the thresholds for the inclusion of certain expenditure items should be agreed between landlords and tenants. The discussion of expenditure thresholds in HRAs, and the way in which information is provided, how often and in what form, should therefore feature in the regular discussions between councils and/or tenants/ RTOs. As the Charter states, the important point is that discussions a) take place and b) reflect the views of tenants in whatever way necessary.

Tenant involvement in decisions about HRA assets

116. Consideration of the asset's alternative options must, where significant, involve the views of tenants as early in the process as possible. The definition of 'significant' will vary by local authority and the appetite of local tenants to be involved will also vary. The degree to which tenants should be involved should therefore be determined between each local authority and its RTOs in line with outcome 3 (Participation) of the Charter. Both parties must decide how tenants will be involved in making decisions about particular assets and what structure this involvement will take.

117. Local authorities and tenants should agree operating principles on the types and values of asset which are significant enough to matter to tenants or their representatives. We do not envisage that tenants will be involved in decisions on small or relatively low value assets. In such cases, and unless the asset had some special significance, the particulars of smaller disposals may not require discussion Councils and tenants must agree how disposals or transfers in relation to both small pieces of land or single, low market value assets will be dealt with. Decisions on what is and isn't published are for local discussion between councils/ RTOs as per the Charter.

118. In larger or more complex land or property cases, tenants may feel entitled to a fuller say on the future of the asset. Local authorities must consider how they evidence that their views are properly considered and take this into account when reaching final decisions about these assets. There may be circumstances where wider service or corporate priorities require the Council to consider a different course of action than that recommended by tenants and for this reason authorities may feel that tenants should not have the final say on the future of such assets. The local authority must balance its legal and financial responsibilities for the asset with its responsibilities to be accountable to its tenants. Such cases should also be dealt with transparently and in line with outcomes 2 and 3 of the Charter. Once again, what is and isn't published is for local discussion between councils/ RTOs as per the Charter.


Email: HRA Guidance

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