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New research highlights £600m service charge deficit across sector
Social landlords are facing a service charge deficit of £600m a year as only 78% of the costs are being recovered, according to Housemark’s latest analysis.
New research highlights £600m service charge deficit across sector #UKhousingSocial landlords are facing a service charge deficit of £600m a year as only 78% of the costs are being recovered, according to Housemark’s latest analysis #UKhousingThe data company’s findings from social landlords’ accounts for 2024-25 revealed a slight 2% increase in service charge recovery on the previous year of 76%. This is still down on the 85% recovered in 2017-18.
Earlier this month, the Royal Institution of Chartered Surveyors updated its service charge management code to reflect the growing importance of fire safety compliance with the Building Safety Act 2022.
The updated code is intended to help the sector establish best practice when applying and handling service charges.
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As Housemark’s report pointed out, the “under-recovery compounds the margin pressure created by inflation, higher interest rates and rising repairs spend”, with the inflation shocks of 2022 and 2023 only increasing this pressure.
To illustrate this point, the report also found that capitalised major repair spending has continued to climb, with £3.9bn spent across the sector in 2024-25.
This was the fourth straight year that such spending has increased, since the Covid-affected financial year of 2020-21 and is more than double the £1.7bn spent in 2017-18, when Housemark began collecting data.
Even adjusting for inflation, capitalised major repair spending was 82% higher in 2024-25 compared with 2017-18.
Other notable headlines from the report include the highest-ever recorded cost per social housing property: £5,136.
Operating margin across the sector remained stable, however, at 17.3%, but EBITDA MRI (earnings before interest, tax, depreciation and amortisation, major repairs included) interest cover has fallen to 87%, according to the Regulator of Social Housing.
The report argued that the sector has moved from a period of uncertainty to one of accountability, with boards and executives now expected to demonstrate value for money through outcomes, not just resilience.
The report also pointed out the need for good governance that hardwires accountability for outcomes, and highlighted how investment in workforce capability operating at 18% lower cost per home and achieving operating margins 91% higher than the sector median.
Commenting on the overall financial picture, Jonathan Cox, chief data officer at Housemark, said: “The sector now has clear rent policy, regulatory direction and a more predictable operating context.
“But the data shows this has not translated into financial headroom. Record costs, high reinvestment demands and constrained capacity mean the challenge is no longer about stability – it is about execution and value creation.”
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