Scottish regulator highlights surge in landlords’ borrowing activity

This reinforces the position of landlords “as an attractive proposition for both traditional banks and capital market investors”, the regulator said.

Landlords used the “vast majority” of new loans to support new affordable homes development, it added.

A total of £7.18bn of debt facilities were available to Scotland’s social landlords last year, which represents an increase of just under 5% from the £6.84bn at the end of 2023-24.

These findings underscore “growing financial confidence and investment in affordable housing”, according to the regulator.

The report also emphasised the challenging financial environment, with landlords facing constrained public funding, inflationary pressures, interest rate volatility and ongoing development risks – all alongside trying to maintain rent affordability for tenants.

“[Registered social landlords’] governing bodies are therefore having to make increasingly difficult decisions regarding the optimal allocation of resources,” the regulator said.

Landlords plan to increase their borrowing by an additional £1.3bn over the next five years for investment in existing and new homes, as well as refinancing existing debt and meeting net zero requirements.

In 2024-25, they had total cash and undrawn facilities of £1.6bn, an increase of £118m compared to the previous year, which shows that “aggregate liquidity remains strong”, the regulator said.

The report also noted that the reducing interest rate environment is “less impactful for historic debt” since 70% of debt outstanding among landlords is on a fixed rate basis.

It said: “The recent volatility in interest costs demonstrates the importance of landlords maintaining sufficient liquidity to manage higher interest payments and operating costs during economic uncertainty, and of retaining the confidence of current and future lenders and investors.”

The regulator said it would continue “close engagement” with landlords exhibiting low liquidity or potential covenant risks.

However, it also emphasised that no secured lender has ever incurred a loss within Scotland’s social housing sector, and no tenant has lost their home due to a landlord default.

Shaun Keenan, assistant director of financial regulation at the SHR, said continued investment from lenders “reflects strong confidence” in social landlords and the “regulatory framework”.

He said: “Scotland’s [social landlords] have, in general, maintained sufficient liquidity to navigate a challenging operating environment shaped by a national housing emergency, inflationary pressures and evolving demands on their resources. 

“Our latest report underscores their continued financial resilience, which enables ongoing investment in both new and existing homes.”

In September 2024, Scottish housing association Kingdom Group secured a £50m loan from the Royal Bank of Scotland and Bank of Scotland to help it develop around 500 new homes.

Social landlords across the country recently called for action after warning that soaring building costs and uncertainty over new standards will leave a “multibillion” funding gap to tackle the country’s housing emergency.