Increased expenditure on repairs and maintenance by housing associations, driven by a sharper focus on health and safety after the Grenfell Tower fire has been revealed in the sector’s global accounts for 2018/19.
The global accounts published by England’s Regulator of Social Housing, shows that the overall operating surplus on social housing lettings fell six per cent to £4.7bn, following a two per cent fall to £5bn in the previous year.
The fall in operating surpluses for 2018/19 was largely driven by significant increases in repairs and maintenance – with a £118m (six per cent) increase in routine maintenance costs and a £111m (13 per cent) rise in planned maintenance spending. Management costs also rose while rental income flatlined.
Total repairs and maintenance spending on existing stock was £5.5bn, compared with £5.2bn in 2017/18. However, it is unclear how much of the increase is due to extra works and how much was caused by cost inflation on materials and labour.
This should become clearer in late January when the regulator is expected to publish the findings of its analysis of metrics and benchmarking of costs. But it is expected there will be a growing focus on value for money from Ministers and the Regulator ahead of the March budget. HAs with higher than average costs for management and maintenance can also expect greater scrutiny.
Fiona MacGregor, chief executive of the RSH, said: “Although the accounts show the sector is performing strongly overall, we have seen a reduction in margins, on both rental properties and those built for sale, and in overall surplus.
“This highlights that boards must remain vigilant by continuing to monitor and manage the potential risks facing them.” She added that the sector “continues to maintain its financial position, while increasing investment in new and existing homes”.
Management and service charge costs rose by similar amounts to maintenance spending, up £118m (six per cent) and £88m (five per cent) respectively. Meanwhile rental income was stable, as the centrally imposed social housing rent cut entered its third year.
The sector’s overall operating margin fell for the second consecutive year from 28 per cent in 2017/18 to 25 per cent last year, with margins tightening for social housing lettings, shared ownership sales and market sales.
Housing associations raised a record £13.5bn in debt finance in 2018/19, up from £10bn the previous year. The sector invested £12.1bn in building new homes across all tenures last year, up 12 per cent – with investment in for-sale tenures soaring 40 per cent from £2.8bn to £3.9bn.
By Patrick Mooney, Editor