What does the Regulator's latest quarterly report say about the sector's finances?

The Regulator of Social Housing’s latest quarterly survey presents a mixed picture when it comes to the sector’s finances. 

Last month, the Regulator of Social Housing published its latest quarterly survey, providing key financial insights gleaned from a survey of nearly 200 private registered providers in England. 

The survey presents a mixed picture overall. On the one hand, sector liquidity and access to finance remains strong, while inflationary pressures have started to ease; on the other, the sector is spending record amounts on repairs and maintenance and there are persistent concerns around its ability to pay the interest on its debts. 

Let’s explore these findings in more detail. 

Repairs and maintenance spending continues to rise 

The amount registered providers are spending on repairs and maintenance continues to rise, with the January-March period recording the highest ever quarterly spend at £1.2 billion.  

Yearly repairs and maintenance spending has also reached an all-time high at £7.9 billion, a 15 per cent increase on the previous 12-month period. 

The continued increase in expenditure can be attributed to works around damp and mould, building safety compliance and ‘catch-up’ works, a backlog that mostly concerns larger repair programmes being put off due to responsive repairs taking priority. 

Inflationary pressures appear to be subsiding 

Providers have said inflationary pressures relating to materials and labour have had less impact on delivery programmes than in previous quarters. 

This reflects the general easing of inflation within the UK economy, with Consumer Price Inflation (CPI) falling to 3.2 per cent in March. (CPI has since fallen to 2%.) 

However, while inflationary pressures have generally eased, costs have increased for some due to the need to secure specialist tradespeople who are currently in short supply – an issue that shows no signs of abating, at least in the near term. 

Sector liquidity remains strong 

Although providers may be spending more on things like repairs and maintenance, liquidity in general remains strong, with the sector continuing to attract lenders and investors, indicated by the record levels of new financing.

Private finance borrowing, for example, has risen to the highest level in three years, at £4.4 billion in the quarter (also representing the largest quarterly increase since the start of pandemic). 

Cash balances rise – but remain low 

Available cash also increased slightly during the quarter to £4.3 billion, up from £4.2 billion in the previous quarter.

However, the overall amount of available cash remains down by £1.5 billion on the average for the past three years.

What’s more, the amount of available cash is forecast to fall by more than £1 billion over the next 12 months, primarily due to reserves being tapped into to fund new development, indicating a continuation of the wider downtrend in this area. 

Cash interest cover stays low 

There are concerns about the sector’s overall level of cash interest cover, which averaged 84 per cent for the quarter. 

It marks the sixth consecutive quarter in which this figure has stood below 100 per cent, partly due to record levels of repairs and maintenance expenditure and rising interest costs. 

Cash interest cover is projected to fall ever further over the coming 12 months to an average of 75 per cent, again, as costs around repairs and maintenance and interest payments persist. 

A shrinking margin on sales of non-social homes 

While providers are overall making a profit on sales of non-social homes, the average margin has fallen to just above 10 per cent (10.7%).  

This is the lowest margin since March 2022, and compares with an average margin of 14.4 per cent over the last three years. 

The reported sales margin has been affected by year-end revaluations and impairment provisions. 

Three of the four providers with the highest non-social housing sales proceeds reported a quarterly loss. 

More providers are reporting an impairment charge 

The number of providers reporting an impairment charge continues to rise each year, with 66 now anticipating reporting an impairment charge in their 2023/24 accounts. 

This is 12 more than the 2022/23 period, which itself was higher than the 2021/22 period. 

The total anticipated impairment charge is £345 million, of which £250 million relates to social housing assets. 

Income collection looks healthy 

Ending on a positive note, levels of arrears, rent collection and voids for the quarter have all fallen within or have outperformed business plan assumptions for more two-thirds of providers (68%, up from 64% on the previous quarter). 

On rent collection in particular, the mean average collection rates rose from 98.8 per cent at the end of December to 99.4 per cent at the end of March. 

This is in line with seasonal trends, though higher than the equivalent period for 2022/23. 

CIH’s thoughts 

CIH policy and practice officer Megan Hinch, who leads on CIH’s housing supply and finance work, said: “The sector has experienced increasing financial pressures in recent years, which has resulted in an operating environment of higher expenditure with reduced income. 

“As such, many organisations are facing difficult decisions between investing in existing homes or building the new homes required to meet housing demand. 

“This reinforces the call for a long-term plan for housing, including a sustainable rent settlement and new funding for the Affordable Homes Programme, so that organisations can plan ahead and meet the needs of those that live in their homes.” 

• Read the Regulator’s full report

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