Guidance

Housing Revenue Account

Information and advice on the Housing Revenue Account (HRA) and consents for disposal of land from the Housing Revenue Account.

From:
Ministry of Housing, Communities and Local Government, Ministry of Housing, Communities & Local Government (2018 to 2021) and Department for Levelling Up, Housing and Communities
Published
14 March 2019
Last updated
10 November 2020 — See all updates

Applies to England

1. Overview

The Housing Revenue Account (HRA) is intended to record expenditure and income on running a council’s own housing stock and closely related services or facilities, which are provided primarily for the benefit of the council’s own tenants.

The main features of the HRA are:

  • it is a landlord account, recording expenditure and income arising from the provision of housing accommodation by local housing authorities (under the powers and duties conferred on them in Part II of the Housing Act 1985 and certain provisions of earlier legislation)

  • it is not a separate fund but a ring-fenced account of certain defined transactions, relating to local authority housing, within the General Fund

  • the main items of expenditure included in the account are management and maintenance costs, major repairs, loan charges, and depreciation costs

  • the main sources of income are from tenants in the form of rents and service charges

  • the HRA should be based on accruals in accordance with proper accounting practices, rather than cash accounting

Legislative features are:

  • ring-fenced account within the General Fund
  • Credits and Debits are prescribed by statute
  • no general discretion to breach the ring-fence
  • cannot budget for a deficit
  • all borrowing within the HRA is in line with the CIPFA Prudential Code

2. Who is required to hold an HRA?

Any local housing authority that owns 200 or more social dwellings are required to account for them within their HRA.

‘Local housing authority’ means a district council, a London borough council, the Common Council of the City of London, a metropolitan borough council, a unitary council, or the Council of the Isles of Scilly.

County councils, where they are part of a two-tier system, parish councils and town councils are not local housing authorities.

Any local authority that owns fewer than 200 social dwellings does not need to account for them in an HRA, however conditions do apply. Please see section 5.

3. How to open an HRA

The account will be maintained and monitored through a local authority’s existing accounting channels. You do not need to have permission granted by the Secretary of State to open an HRA, however the Ministry of Housing, Communities and Local Government requests a letter to the Secretary of State declaring the intention to open an HRA.

4. Building in the HRA

If a local authority already has housing stock held in an HRA, they are free to borrow in line with the Prudential Code, to get building the council housing that their community needs.

5. Accounting for social housing in the General Fund

A local authority may hold up to 199 homes outside the HRA under Direction, so local authorities that have previously transferred their stock to a housing association, or that retain very low levels of council housing, may borrow prudentially through the General Fund to get building.

Once the 200 home threshold is reached, a local authority must open an HRA and may borrow prudentially to continue their building within the HRA.

Local authorities planning to build outside the HRA must write to the Secretary of State for Housing, Communities and Local Government to apply for a direction that permits these homes to be held outside the HRA; this is usually a formality, though in some instances there is a duty to consult.

Any council dwellings that are built outside the HRA must be covered by a direction.

To get a direction, please email HRAqueries@communities.gov.uk.

6. Operation of the Housing Revenue Account ring-fence

On 10 November 2020 MHCLG published guidance on the operation of the Housing Revenue Account ring-fence. This guidance updates and replaces Circular 8/95 published by the former Department of the Environment (DoE). It gives advice to local housing authorities in England on certain aspects of the HRA.

This guidance restates ministers’ established policy for the HRA and introduces no new issues of principle. However, it does highlight the need to be fair to both tenants and council taxpayers and that there should be a fair and transparent apportionment of costs between the HRA and General Fund.

7. Removal of the HRA borrowing cap

On 29 October 2018, the government confirmed that the HRA borrowing cap was abolished with immediate effect.

As a result, local authorities with an HRA are no longer constrained by government controls over borrowing for housebuilding and are able to borrow against their expected rental income, in line with the Prudential Code.

The abolition of the borrowing cap also benefits local authorities that wish to build council housing but do not have an HRA.

Such authorities are able to borrow in line with the Prudential Code to build up to 200 council homes, subject to requesting a Direction from the Secretary of State allowing them to account for these homes outside the HRA. Once they build 200 homes they need to set up an HRA.

Previously, at this stage, authorities in this position would have faced a cap on their borrowing. The level of this cap would need to take account of the relatively small numbers of homes held by the authority and the low level of debt that could be supported. However, such authorities no longer face this barrier.

Local authorities that decide to reopen their HRA to build more homes, will be able to borrow in line with the Prudential Code, in the same way as all other local housing authorities.

8. HRA legislation

Credits and Debits to the HRA (including item 8 determinations)

Calculating the HRA capital finance requirement

Self-financing settlement

Accounting practices

9. Consents

If a local authority wishes to dispose of land or property, or provide financial assistance in connection with housing, they may require the consent of the Secretary of State in accordance with various sections of statute.

Registered providers and others that have land that formerly belonged to a local authority, and wish to dispose of it, or want to acquire such land or housing may also require the consent of the Secretary of State.

Some disposals or transfers of housing land are now covered by General Consents in which cases the Secretary of State’s consent has already been given and individual applications to the Secretary of State are not required.

If a local housing authority requires a specific consent they will need to apply by completing an application form for the relevant consent and send to HRAqueries@communities.gov.uk.

The authority must complete the form setting out their proposals, supported by a strategic and economic justification for the disposal and/or financial assistance.

The most frequently used consents are described below. This is for information, it is the responsibility of the local authority to seek their own legal advice.

A. General consents

General consents are intended for local authorities to dispose of or appropriate land or property without the need to individually come to the Secretary of State for approval.

There are general consents issued under various sections of housing legislation that allow disposal of land or property for its best consideration and where no secure, introductory or demoted tenants are impacted.

If the circumstances of a particular case meet all the criteria set out in one of the general consents, then the local authority may proceed with the disposal without formal application to the Ministry of Housing, Communities and Local Government (MHCLG).

There are no general consents issued under section 12, section 19 or section 43 of the Housing Act 1985.

MHCLG is currently considering whether the general consents can be extended to cover more routine applications.

B. Frequently used consents under the Housing Act 1985

Part II of the Housing Act 1985 contains the basic powers under which local housing authorities provide housing accommodation for people in need.

Sections 32-34

General consent: This general consent gives local authorities the power to dispose of land held for the purposes of Part II housing (broadly speaking social housing) at market value without the consent of the Secretary of State. Subject to some discrete exceptions.

Specific consent: However, if a local authority wants to dispose of land at less than best consideration they will need to ask the Secretary of State for permission. Consent might also be needed from the Secretary of State when selling a house occupied by a secure tenant or disposing of more than 5 disposals in a financial year to a company wholly or part owned by a local housing authority (a local housing company).

Section 12

This requires local authorities to seek consent from the Secretary of State to provide and maintain facilities in connection with housing accommodation held under Part II. This could be a recreation area which is part of a social housing estate or a building for use as a shop connected to the estate.

Section 19

Appropriation enables the local authority to take the dwelling out of the Housing Revenue Account. Local authorities are required to seek consent from the Secretary of State to appropriate Part II land which has housing on it (even part of a housing unit).

Local authorities were already allowed, under section 122 of the Local Government Act 1972, to appropriate any land which is no longer required for the purpose for which it is held.

Section 19 of the Housing Act 1985 makes an exception to that, and local authorities should apply for this consent if they wish to appropriate land which contains housing property from Part II to any other purpose.

Section 43

Consent under section 43 of the Housing Act 1985 is required for the disposal of a dwelling which is held under powers other than Part II of the Housing Act 1985 and which is subject to a secure tenancy or a right to buy lease.

Such properties are rare, but an example might be a house which was acquired under Highways Act powers for a road scheme which was subsequently cancelled.

C. Frequently used consents under the Local Government Act 1988

Section 25

Section 24 of Local Government Act 1988 empowers a local housing authority to provide any person with financial assistance for the purposes of, or in connection with, the acquisition, construction, conversion, rehabilitation, improvement, maintenance or management of any property which is or is intended to be privately let as housing accommodation.

To use these powers, local authorities may need to seek the Secretary of State’s consent under section 25 of the act. Section 26 sets out matters which the Secretary of State is to take into account in considering the application.

General consent: The general consents under section 25 allow local authorities to sell to anybody at market rate, where the new owner will provide the housing at social or affordable rent. There are various general consents under section 25, local authorities should use their own legal advice to determine which one applies.

Specific consent: If the local authority wants to dispose of vacant land at less than market value, even if the total return is greater (if, for example, more homes are provided on the land) the local authority should apply for a consent from the Secretary of State. A local authority should seek consent for anything not covered by the general consents.

D. Frequently used consents under the Housing Act 1988

Section 133

A specific consent under section 133 may be required for onward sale of Right to Buy homes where it has been mentioned in the register of title.

Where consent for a disposal was originally required under section 32 or section 43 of the Housing Act 1985 the person acquiring the land or property needs the consent of the Secretary of State under section 133 of the Housing Act 1988 to dispose of it (unless the General Consents 2013 and General Consents correction slip 2013 applies).

E. Frequently used consents under the Local Government Act 2003

Section 11(6)

Section 11(6) permits the Secretary of State to enter into agreements with local authorities to exclude specified Housing Revenue Account properties from the requirement that, should the home be sold under the Right to Buy, a proportion of the receipt be surrendered to central government.

F. Specific consents

If the circumstances of a case do not meet the general consents’ criteria, or any of the other sections above, there is the option for the local authority to seek the Secretary of State’s specific consent by writing to HRAqueries@communities.gov.uk.

The most commonly used application forms can be found in the relevant sections above.

G. Application process

MHCLG aims to issue a letter granting specific consent, within 20 days of receipt of the application for section 32, section 43, section 12, section 19 and section 25 and within 25 days for section 133, assuming that there are no significant concerns with the application.

For any further queries on consents, please contact HRAqueries@communites.gov.uk.

10. Consents legislation

11. Discretionary Housing Payments

Local housing authorities can apply to the Ministry of Housing, Communities and Local Government for an Item 9 Credit and Item 10 Debit Direction if they want to make Discretionary Housing Payments (DHP) available to their own tenants through the Housing Revenue Account (HRA).

The Local Government and Housing Act 1989 sets out the accounting framework for the HRA. As there is no express provision relating to the funding of DHPs from the HRA, MHCLG is prepared to issue Directions to put the matter beyond doubt for individual authorities. Funding remains subject to the Department for Work and Pensions rules and limits.

A local housing authority can apply by sending an application to HRAqueries@communities.gov.uk.

Updates to this page

Published 14 March 2019
Last updated 10 November 2020 + show all updates

  1. Added section on Operation of the Housing Revenue Account ring-fence.

  2. Added section 10 on Discretionary Housing Payments.

  3. First published.

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