Total cash and undrawn facilites at ‘historic lows’ but should cover next year’s costs
Development spending by social landlords is set to drop over the next year as providers focus on improving existing stock, according to the Regulator of Social Housing.
The regulator this morning published the results of its latest quarterly survey of private registered providers’ financial health, which covers the period from the start of last October to the end of December.
Findings showed that landlords had invested £3.9bn on building and acquiring new homes in the period, up from £3.2bn in the previous quarter, although investment across the whole of 2024 was £0.9bn lower than in 2023.
Over the next year, social landlords plan to spend a further £14.8bn on development, only £10.5bn of which is currently committed.
This marks a reduction from £15.6bn of planned spend and £10.9bn of committed spend forecast in the previous quarter, which puts forecasts at their lowest levels since the start of the pandemic.
“Social landlords continue to face pressures on multiple fronts,” said Will Perry, director of strategy at RSH.
“The sector is building substantial numbers of new homes for the future, with actual and forecast development spend close to pre-pandemic levels,” he said.
“That said, there has been a notable drop in forecast development spend as landlords continue to invest record amounts on existing stock, including on vital work to improve fire safety and damp and mould.”
Spend on repairs and maintenance totalled £2.3bn in the quarter and a further £9.8bn is forecast for the next 12 months.
The regulator said lending to the sector remained “robust”, with £2.6bn of new finance arranged in the quarter, but it noted a high level of debt drawdowns, resulting in a decrease in undrawn available facilities and cash balances.
Despite being at “historically low levels”, the regulator said total cash and undrawn facilities of £33.4bn were still enough to cover forecast interest costs, loan repayments and development for the next year.
Aggregate cash interest cover (excluding sales) stood at 82% for the 12 months to December 2024, with forecasts showing a further deterioration is likely.
Cash interest cover measures an association’s ability to pay its cash interest expenses using operating earnings and is a key metric used by lenders and the regulator to measure organisations’ viability.
The RSH said that performance varied among landlords, with larger organisations often having lower levels of interest cover.
The regulator said this was being driven by higher levels of spending on existing stock among these providers.
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