Scottish landlords warned of £40m income gap if rent collection falls by 0.5%

Chris Magennis, Mobysoft’s Scotland director, said: “As financial headroom is being squeezed, we will see business models being increasingly reliant on the ability to maintain very high levels of rent collection.

“Our own analysis highlights how even marginal changes in rent collection rates can have material consequences for landlords and the lives of tenants.”

Mr Magennis claimed that according to Mobysoft’s own statistics, landlords which did not use its rent arrears software had collection rates that were 0.41% percentage points lower than those that did.

When the lower rate is applied to the SHR forecasts it equates to £42m, around £300,000 per landlord per year.

He added: “Boards and executive teams should be seeking assurance on stress-testing income under lower collection scenarios, strengthening early warning indicators for arrears, reviewing strategies for recovering former tenant debt and ensuring income teams have the capacity and data intelligence required to respond to a rapidly evolving operating environment.”

The firm’s report also noted that the SHR is forecasting that around four-fifths of RSLs’ income is due to come solely from rent.

It claimed that underlying assumptions within the sector’s forecasts “expose a significant and potentially under-recognised risk around income collection” for the country’s landlords, which needs to be tackled as a strategic priority.

Responding to the news, Richard Meade, the chief executive of the Scottish Federation of Housing Associations, stressed the sector’s resilience but said more public funding is needed to help support residents with the cost of living.

He said: “Scotland’s housing associations are proud not-for-profit organisations who work incredibly hard every year to deliver truly affordable rent, while ensuring that they have the necessary funds to maintain and retrofit current homes as well as build much-needed new ones.

“Housing associations and their staff work hard with tenants to ensure they can pay their rent, with many providing financial inclusion services to ensure they have all the income they are entitled to.

“They have proven to be incredibly resilient organisations, but we do need to see the next Scottish government stepping up and providing more crucial funding to support housing associations with ongoing building safety work such as cladding remediation, reaching net zero goals and supporting tenants with the cost of living.”

The SHR’s forecast for the sector was published last December. The regulator found that while social landlords’ finances are generally stable, they face ongoing financial challenges, with turnover set to increase by 3.9% per year and costs by 3.1%.

Shaun Keenan, the SHR’s assistant director of financial regulation, said at the time: “RSLs continue to operate in a challenging economic climate.

“While aggregate finances are stable, headroom remains tight with further pressure ahead. Most RSLs are managing these challenges through prudent management and efficiencies, but their ability to absorb extra costs – such as those for fire safety works and decarbonisation – remains limited.

“Strong governance is essential to maintain financial resilience and deliver better tenant outcomes. Governing bodies also need accurate, comprehensive data to guide decisions and prioritise spending.”