The social housing sector successfully managed the impact of challenging economic conditions in 2011-12, according to the Homes and Community Agency’s (HCA) 2012 Global Accounts of housing providers.
Challenges lie ahead, but the accounts, produced by The Social Housing Regulator, demonstrate that the sector remains financially robust and the sector is well placed to face them.
The accounts show that the sector continued to grow its asset base and recorded an aggregate surplus of £1.8bn; £0.7bn ahead of that recorded in 2011. This increase in surplus was achieved through the combination of increased turnover attributable to inflation linked rent increases and improved financial performance in housing sales activity exceeding increases in the sector’s operating costs.
In total, reserves increased by £2.3bn, to £20.7bn. The total net book value of the sector’s fixed assets increased by £5.7bn to £71.1bn. As at March 2012 the sector had re-invested 88% of its total reserves into its fixed asset base. This includes spending on new supply and improvements to existing stock.
Providers continue to raise the significant levels of debt required to deliver their planned growth as they represent a good credit risk for investors. The sector in aggregate raised an additional £3.4bn of debt, including £1.8bn raised in bond issues. This represents an increase in bond issuance of over 90% compared to the previous year.
The report’s analysis of financial forecasts demonstrates that the sector will be increasingly reliant on debt funding and cross-subsidy from sales to deliver new homes for rent in the future. In 2012, housing sales, including low-cost home ownership (LCHO), social and open market sales recorded encouraging financial results. Increased sales revenue from LCHO reverses a declining trend over the previous three years and indicates the sector in aggregate is effectively managing sales risk whilst the housing market remains subdued.
Other financial highlights include:
- turnover rose by 9% to £13.8bn
- total operating costs increased at a lower rate of 6% to £10.5bn
- management costs per unit increased by 4%, following two consecutive years of decreases
- total major repair costs per unit increased by 14.8%, also reversing a trend of decreased per unit spending in the previous two years
- routine and planned maintenance per unit costs fell by 3%, for the second year running
- major repairs spending totalled £2.6bn, an increase of 16%, as the sector continued to invest in its stock.
Mick Warner, Deputy Director of Regulatory Operations, said: “The accounts illustrate that the strong performance of the sector in 2010-11 has continued into 2011-12. This year saw providers having to contend with continued uncertainty in the financial and housing markets on which the sector relies for its future growth, meaning that they had to combine robust operational management with a focus on risk exposure.
“Changes resulting from the implementation of welfare reform will see a changing profile to the certainty of rental income flows and as reforms are implemented, it is imperative that the sector ensures it maintains its current operational performance.
“Looking ahead, whilst the financial results indicate the sector is responding well to the current economic environment, it is vital that boards remain focused on the range of challenges and risks and continue to manage them effectively. As regulator, we will continue to seek assurance that providers are managing these challenges effectively to ensure that economic standards are met.”
Highlighted today at the National Housing Federation (NHF) Housing Finance Conference, the 2011-12 Global Accounts show the financial position and performance of registered social housing providers managing over 1,000 homes. It covers the period 1 April 2011 to 31 March 2012.
The widespread adoption of a new accounting treatment for major repairs spending, component accounting, has impacted on the year on year comparability of some elements of the accounts but the underlying cashflow dynamics of the sector are unaffected by this change.
