Thursday, 19 January 2017

Scottish regulator warns on rent affordability

The Scottish regulator has warned housing associations that increases in rents are a risk if tenants’ incomes do not also increase in real terms.

In its annual assessment of the finances of 160 Scottish housing associations, the Scottish Housing Regulator found the annual turnover of the sector in 2014/15 had increased by 4.2% compared to 2013/14, from £1.3m to £1.4m.

However, the total cash generated from operations was slightly less than the £412m generated in 2013/14, at £406m.

In its report the regulator said one of the most important risks for housing associations “relates to future rent levels”.

It added: “Most RSLs continue to rely upon above-inflation increases in rents. We see a reliance upon above inflation increases in rent as a potential risk to the financial health of some RSLs given the uncertainty about the future of the welfare system and the risk that the income of those in work may not increase in real terms.”

The sector’s net surplus was £124m, a 24% increase on 2013/14 when it was £96.6m. Only nine housing associations had a net deficit, the lowest number in five years.

Housing associations spent £702m in the acquisition and construction of houses, an increase of 15.1%. However, this is still lower than three years ago when £805.6m was spent.

The total private investment in social housing exceeded £5bn for the first time. The regulator said private investment in social housing had grown “more than fivefold” in less than 20 years.

Around 80 housing associations are developing new social housing with grant assistance from the Scottish Government and private borrowing. Another 10 housing associations are planning to build over the next five years, the regulator said.

The regulator concluded most housing associations are successfully managing financial risks.

Ian Brennan, director of regulation (finance and risk) at the regulator, said: “We are aware that many RSLs are making considerable efforts to ensure that rents remain affordable for tenants and all RSLs need to set rents in a way that places affordability for tenants at the centre of their planning.”

David Bookbinder, director of Glasgow and West of Scotland Forum of Housing Associations, said: “Our data shows the average size of rent increase this year is clearly significantly down on the previous years. Housing associations are making efforts to achieve a balance between a business plan which looks at modernising the stock over a long period of time and keeping rents genuinely affordable – it’s always a balance. There’s been a re-balancing towards smaller rent increases this year.”

Mary Taylor, chief executive of the Scottish Federation of Housing Associations, said housing associations keep rents “constantly under review” and SFHA’s latest analysis shows they are “getting the balance right”.

Updated at 4.05pm on 24/03/02016 with a quote from David Bookbinder, director of Glasgow and West of Scotland Forum of Housing Associations and Mary Taylor, chief executive of SFHA

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