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Sector capacity down 9% since rent cut, research shows
Housing associations’ financial capacity is down 9% since the four-year rent cut began, research has shown.
Analysis by Savills Housing Consultancy – seen exclusively by Inside Housing – shows that capacity in the sector has fallen as homes drop in value and associations cut back on maintenance, management and major works.
The consultancy compared average figures for 560,000 properties for 2017/18 with those across 2013/14 to 2016/17 to show the effect of George Osborne’s rent cut.
It found that the average value of an affordable home has fallen 9.02% to £21,091, when measured using Net Present Value (NPV).
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This is a method of valuation that takes into account an asset’s cashflows over 30 years – essentially rent minus costs.
The research also found that associations had cut their major works costs over the next 30 years by an average of 12.95% to £25,804 per property, and that annual management and maintenance spending was down by an average of 7.56% to £1,809 per property.
Mr Osborne announced the rent cut in 2015 as part of his plan to eliminate the UK’s deficit on day-to-day spending, a target which was finally reached today – two years late.
He tweeted: “We got there in the end – a remarkable national effort.”
The Regulator of Social Housing and credit ratings agency Moody’s have both previously published research showing that housing associations had reduced spending on repairs in response to the rent cut.
However Paul Hackett, chair of the G15 group of London housing associations, told Inside Housing in December that he thought associations were finding efficiencies and investing where needed.
Cathy Osborn, director at Savills Housing Consultancy, said: “We last conducted this analysis 18 months ago and identified a similar loss in financial capacity among housing providers as a result of the 1% rent cut over the four years to April 2019.”
John Kiely, another director at the company, added: “In the context of the tragedy at Grenfell Tower many landlords are having to consider additional expenditure requirements for compliance. As a result, the need to balance this additional funding need with intelligent reductions in expenditure in other areas is even greater.”
