Hackney Council is set to capitalise interest on borrowing costs for housing schemes, a move aimed at easing financial pressures on both the Housing Revenue Account and the General Fund and contributing to closing the budget gap for 2026/27 and beyond.
The decision was made during a recent Cabinet meeting, where councillors discussed a change to the council's accounting policy regarding the treatment of borrowing costs for assets under development. The council will now capitalise the interest on borrowing costs for appropriate schemes in its housing and other regeneration programmes.
This accounting shift, which is standard practice in the private sector, is expected to generate revenue savings and support the council's budget strategy in the medium term, improving the financial sustainability of the Housing Revenue Account (HRA). The council expects this change to contribute to closing the budget gap for 2026/27 and beyond.
When the housing schemes are completed and become operational, the capitalized interest will be managed over the asset's life through the annual depreciation charge. For General Fund assets, it will be repaid via a slightly increased Minimum Revenue Provision (MRP) charge; for Housing Revenue Account (HRA) assets, it will be paid via an increased Depreciation charge. This effectively swaps a large, volatile, in-year expense for a smaller, predictable charge over the life of the asset.
According to the meeting's report pack, this change will take the cost pressure off both the Housing Revenue Account and the General Fund. The decision was part of a broader discussion on the Capital Update and Property Disposals and Acquisitions Report.
The meeting information does not mention any alternative strategies that Hackney Council considered before deciding to capitalize interest on borrowing costs.