New homes, repair and maintenance costs all rising above inflation, warns NHF 

Inflation measured by the Consumer Price Index (CPI) was at 10.1% in July and the CEBR said it expects this figure to hit 11.6% in quarter four 2022.

Following this peak, inflation is set to subside, though it is still expected to average 5% over the second half of 2023. 

Further pressure on employers and housing associations stems from large increases in nominal pay. Over the first half of 2022, earnings increased by 6% on average over the past year.

Ms Henderson said: “This report demonstrates the huge financial pressures housing associations are currently facing, with the cost of repairs materials and building new homes already rising well above inflation by 14% and 12.3% respectively. 

“This is likely to worsen over the coming months, feeding through to all areas of spend and is on top of the pressures of building safety costs and the costs of retrofitting homes. We know there will be particular challenges for supported housing providers who operate on very tight margins.”

She stated that landlords must continue to be able to maintain their homes and provide vital services to residents in the years ahead.

Ms Henderson added: “They are also concerned about the impact rising living costs are having on social housing residents. 

“In this context they have been thinking very carefully about their approach to future rents and are actively looking at what additional support they put in place for residents.”

The impact of inflation on future rental income is a hot topic across the sector at the moment, as the level that associations can raise social rents is set according to the inflation figure from September when the government announces the formula to be used.

The current policy came into effect in April 2020 and permitted rents to increase by up to the value of CPI inflation as at the previous September plus 1% annually.

This would mean that social rents could rise by as much as 11.1% in 2023-24, if forecasts for inflation are correct.

But on Monday it emerged that the government is mulling a cap on the amount that housing providers will be able to increase rents by next year as part of measures to ease pressure on tenants hit by the cost of living crisis. News on the approach the government is set to take is expected imminently. It’s understood that behind the scenes the government accepts the NHF’s analysis of the cost pressures that housing providers are facing too and that it is looking to work with the sector on potential solutions.