The combined operating surpluses of housing associations has fallen for the first time since the regulator started publishing financial data, as spending on day to day running costs and major repairs rose.
Although this was the second year of the enforced one per cent annual rent cut, the joint income of all 1,500 HAs with more than 1,000 homes increased by £500m to £20.5bn. Rents and service charges accounted for £14.7bn, as the number of homes owned or managed by HAs rose to 2,712,000.
In the 2018 Global Accounts, the Regulator of Social Housing reported that the sector’s operating surplus on social housing fell by two per cent from £5.2bn to £5bn.
At the same time management costs (on staffing, running offices, utilities etc) went up by six per cent (up by £152m) while spending on major repairs rose by four per cent (up £20m). These combined resulted in a fall in the overall operating margin to 28 per cent.
Strong performance
Despite this, the regulator reported that the sector’s financial performance was “strong”, with the sector’s underlying surplus continuing to increase, going up by five per cent to £3.7bn.
Social landlords raised £10bn in new loans and borrowing facilities from banks and the capital markets, up 32 per cent from the previous year. The sector had £17bn in undrawn loan facilities and £6bn in cash, meaning HAs have plenty of access to funding – usually to fund the development of new homes.
Some 41,556 new homes for rent were completed last year, a nine per cent increase on the previous year, as spending on development rose £1bn to £7.3bn. Around 15,000 homes were sold and approximately 1,000 were demolished. Almost 10,000 homes were converted from social rent to the higher, affordable rent.
In 2018 void losses and current tenant arrears were consistent with 2017 at 1.5 and 4.4 per cent of gross rent respectively, but bad debts increased slightly from 0.7 per cent of gross rent in 2017 to 0.8 in 2018. Total reserves increased from £45.2bn in 2017, to £49.5bn in 2018.
By Patrick Mooney, editor