Lessons to be learned from CIPFA’s work with the HRA ring-fence

By Nicole Balkman, Business Advisory and Consultancy, CIPFA

Recent issues regarding the integrity of the Housing Revenue Account (HRA) ring-fence have attracted significant attention, even at the highest levels in Whitehall. CIPFA has been supporting local housing authorities to examine their compliance with the rules – our work shows lessons need to be learnt.

Maintaining the integrity of the HRA ring-fence is a legal requirement. Decisions and practices that undermine its integrity run the risk of being unlawful, as well as being detrimental to HRA tenants. Originally, the ring-fence was introduced to stop councils subsidising tenants, but the intense financial challenges of the last decade have led to concerns that the HRA is seen as a way of easing pressures on the general fund.

HRA rules and regulations haven’t changed since its inception. To further support authorities, the ‘Operation of the Housing Revenue Account ring-fence’ guidance document was published in 2020. It covers core, core plus and non-core services, but it’s open to interpretation. It must also be recognised that services provided to tenants vary from one local housing authority to another, and guidance cannot apply to all circumstances.      

“Maintaining the integrity of the HRA ring-fence is a legal requirement. Decisions and practices that undermine its integrity run the risk of being unlawful, as well as being detrimental to HRA tenants”

One key distinction that should be made is whether a service is being provided to an individual as an HRA tenant, with the council acting as landlord, or as a resident. If it’s the former, a charge to the HRA is appropriate. If it’s a service being provided to residents or council taxpayers irrespective of tenure, then a charge to the HRA isn’t suitable.

In some cases, CIPFA has seen a lack of clarity when it comes to the application of this, and some tenants have ended up being overcharged. There may be examples where an additional level of service is provided to tenants only, and the additional cost can be charged to the HRA – but this needs to be justified and evidenced.

Not only should all charges to the HRA be compliant with the law and guidance, they should also be:

• Equitable
• Justifiable
• Transparent
• Evidenced (supported by SLAs and with a clear and current basis of calculation).

Councils need to consider whether the HRA should be reimbursed for any non-HRA activities that are undertaken, if costs have initially been charged to the HRA. This might include HRA-funded staff working on general fund housing activities.

The council’s responsibility to ensure the integrity of the ring-fence doesn’t end when HRA funds are paid to service providers, such as arm’s length management organisations (ALMOs). ALMOs and other service providers should be able to prove that HRA funds entrusted to them have been spent only on HRA activities. HRA funds shouldn’t be used to subsidise any non-HRA activities they take on.

Councils should also ensure members and officers are aware of the HRA ring-fence and that before any decisions are made, the impact on the HRA is fully considered. Additionally, challenges to current or proposed treatment should be taken seriously by councils.

CIPFA recognises that social housing is a key service, so good financial management is essential to maintaining integrity, stability and value for money.