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Moody’s: associations cut repairs to deal with rent cut
Housing associations have reduced their repairs spending to compensate for the rent cut, according to credit ratings agency Moody’s.
Thanks to savings made from maintenance and major repairs, associations posted record surpluses in 2017, Moody’s said, growing operating surpluses by 10% from the previous year.
The agency’s finding echoes that of the Regulator of Social Housing, which reported in December that major repairs had reduced from £2.4bn to £2.1bn since 2016.
Moody’s said that repairs and management costs were now worth 36% of associations’ turnover from social housing lettings, down from 42% in 2013.
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Matt Fawcett, associate analyst at Moody’s, said: “Housing associations have adapted to policy changes through efficiency savings, consolidation through mergers and revenue diversification into commercial activities to bolster revenue.
“The increase in profitability in 2017 was driven primarily by cost reductions across the core social housing lettings business, including cutbacks on maintenance costs and major repairs.”
Market sales turnover, meanwhile, was worth 18% of the sector’s total revenue in 2017, double the proportion it was five years ago.
According to the agency, social rented units will make up just 49% of the 23,700 units associations plan to develop in 2018. This will fall to a mere 36% in 2019.
Different housing associations have substantially different levels of exposure to market sale. Of the associations in Moody’s portfolio, London’s largest association, L&Q, is the most exposed to market sale, with 2017 sales accounting for 46% of its total revenue.
