The Housing Revenue Account (HRA) is a statutory, ringfenced account of a local authority used to record income and expenditure relating to its housing stock. It covers rental income, service charges, management and maintenance costs, major repairs, and the financing of capital investment in council housing. The ringfence ensures that housing services are financially self-contained, i.e. council tax does not subsidise housing, and housing income is not used to support wider services.
Since HRA self-financing was introduced in England in 2012 and in Wales in 2015, authorities have been responsible for managing their housing business plans over the long term, including servicing historic and new debt. This shift increased local control but also placed greater emphasis on robust treasury management, as borrowing costs and debt structure directly affect the viability of HRA business plans.
The Public Works Loan Board (PWLB) provides borrowing at different rates depending on the purpose of expenditure. For housing-related capital investment, authorities may access the HRA rate, which is set at a rate of gilts plus 0.40% instead of gilts plus 0.80% for the Certainty Rate. The concessionary rate is available for both new housing-related expenditure and refinancing maturing HRA debt.
The availability of the HRA rate has recently been extended through to March 2027. This extension provides medium-term certainty and an opportunity for authorities to review the timing and structure of borrowing decisions. However, beyond that date, the continuation of the preferential margin is not guaranteed, introducing a potential policy risk into longer-term funding strategies.
Of course, clear internal allocation between General Fund and HRA borrowing remains essential. Authorities must be able to demonstrate that loans taken at the HRA rate are fully attributable to eligible HRA capital expenditure.
The principal limit on HRA borrowing is the HRA Capital Financing Requirement (CFR), which represents the underlying need to borrow for capital purposes. Authorities may undertake external borrowing up to the level of their HRA CFR, including any approved increases in the HRA CFR over the next three years, subject to the Prudential Code and their own affordability assessments.
Although the HRA debt cap was abolished in 2018, prudential controls remain firmly in place. Borrowing beyond the approved HRA CFR would imply financing costs without a corresponding capital asset base and would not be prudent. As such, monitoring the projected movement in the HRA CFR within the business plan is critical to inform borrowing capacity and timing.
Where local authorities are short of cash in March and unable to find short-term loans, we usually advise borrowing for at least 13 months to span two financial year-ends to avoid repeating the shortage the following year. However, with the HRA rate confirmed only until March 2027, authorities could consider structuring borrowing to mature before this date, enabling refinancing at the HRA rate again before the current extension expires. This effectively preserves access to the preferential margin while creating a natural decision point should the policy environment change.
Alternatively, longer-term borrowing may be appropriate where certainty of cost outweighs the benefit of short-term flexibility. The decision will depend on projected capital spend, liquidity levels, interest rate expectations and the risk appetite of the authority.
In all cases, borrowing in advance of need must be weighed against carry costs and the potential impact on revenue budgets. The objective remains consistent: to support sustainable investment in housing stock, manage interest rate and policy risk, and ensure that the HRA business plan remains resilient under a range of funding scenarios.
For more information on HRA borrowing strategy and funding options, please contact the team.
24/02/2026
Related Insights