Sector’s average interest cover dragged down by small number of large providers, RSH report says

The figures indicate that financial stress is concentrated among the biggest players in the sector – an important dynamic given how much development output is delivered by large associations and their exposure to market and development risk.

The report shows that, despite these pressures, housing associations invested a record £14.8bn in new and existing homes during the year. But the headline total masks a shift in priorities. Overall reinvestment into new homes fell 4% from £11.4bn to £11bn, while capital spend on existing homes rose 15% to £3.8bn.

The proportion of total reinvestment going into development has fallen from 78% to 74%. The RSH said the overall dip in reinvestment “conceals significant shifts” between categories, as providers redirect resources towards stock quality, sustainability and building safety.

In total, the sector delivered 53,330 new homes, of which 48,548 were social housing. The development of non-social housing declined, and in London – where landlords face particularly high building safety costs – around half of providers delivered no new social homes last year.

Costs continue to outpace inflation. The median headline cost per unit rose 11% to £5,690, compared with a Consumer Prices Index (CPI) of 2.6%. Maintenance and major repairs spend has increased by a quarter since 2023 to £3,420 per unit.

The report highlights rising management insurance premiums, IT upgrades and complaints-handling improvements as cost drivers.

Margins, however, remain subdued, with a median overall operating margin of 17.4%, below the long-term average of 18.5%, with the decline largely driven by weaker non-social housing margins.

Return on capital employed increased to 3.0%, the highest level in three years, but the regulator notes this was partly attributable to a 32% rise in gains on disposal of fixed assets. Short-term debt also rose to £2.5bn, which is likely to reflect providers drawing on short-term facilities rather than locking into higher long-term bond rates.

The report also raises concerns about financial reporting consistency. For a third of large providers, key value-for-money metrics were misrepresented in published accounts compared with regulatory returns, apparently due to failures to deduct gains on disposals, the exclusion of one-off costs and inconsistencies in reported unit numbers.

Will Perry, director of strategy at the RSH, said: “While these are challenging times for some landlords, there is also greater certainty around policy for the sector to actively plan for the longer term.

“Boards must provide robust challenge where landlords are not making the most effective use of their resources to achieve the strategic objectives of the organisation.”

Mr Perry believes landlords “need to be open about how well they are delivering value for money and show evidence that they are meeting the requirements of the VFM Standard”.

He added: “We will continue checking that landlords are meeting the standard through our inspections and if we do not see enough evidence-based assurance, it will be reflected in our regulatory judgements.”