Average margins rise to 28.3%

Inside Housing’s combined accounts for the largest 75 housing associations in the sector show margins rose from 27.2% to 28.3% in 2015/16.

The figure was a result of turnover rising more than a billion to £14.5bn as rents increased, while costs rose by less, to £10.5bn from £9.8bn.

The 2015/16 financial year was the last year when rents rose by consumer price index inflation plus 1%, before the flat 1% rent cut kicked in this year.

London landlord L&Q topped the list with a huge operating margin of 44.6%, followed by 26,000-home Midlands landlord Waterloo, which had a margin of 42.7%.

Operating margin shows the percentage of turnover left after running costs, and is an important measure of an organisation’s efficiency.

Anchor, which provides retirement housing, was bottom with an operating margin of 7.1% due to the higher costs of providing retirement homes.

Sarah Jones, finance director at Anchor, said: “The accounts reflect all Anchor activity, not only social housing, and so are not comparable with other providers. Underlying margin for our social housing for rent has improved from 20.1% to 21.4%.”

Sunderland housing association Gentoo came second bottom, with an operating margin of 8.8%. This was largely due to payments it made during the year to 330 departing staff.

Mervyn Jones, head of Savills Housing Consultancy, said it believes organisations need to aim for a margin of 30% in order to continue to fund development plans as cuts start to bite.  Of the largest 75 associations, only 30 had an operating margin of above 30%

“If you are going much below that, there isn’t a great risk barrier if things go wrong,” Mr Jones added.