Financial position of Scottish social landlords ‘weaker than it has been for several years’

The operating costs of registered providers in Scotland have outstripped growth in turnover in 2022/23, leaving individual providers with reduced financial headroom and diminishing their capacity to respond to further challenges, according to analysis from the Scottish Housing Regulator (SHR).

In 2022/23, social landlords’ aggregate turnover increased by 4.28% to £1.99bn, while housing providers’ operating costs grew at a faster rate, rising by 5.67% to £1.64bn.

The SHR’s analysis of housing providers’ audited financial accounts for the 2022/23 financial year found that cash balances decreased by 12.94% to £776.72m.

In addition, registered providers’ interest cover has fallen by over 13%, from 284.87% in 2020/21, to 246.22% in the previous financial year. The operating surplus of registered providers fell by 3.4% in 2022/23. 

Shaun Keenan, assistant director of financial regulation said: “Overall, the RSL sector’s financial position is weaker than it has been for several years.

”And the scale of the financial challenges faced by RSLs’ since March 2023 remains significant, reflecting the continuing difficulties and volatility in their operating environment. 

“It is therefore important that RSLs’ continue to adjust their business plans in response to changing circumstances to manage their resources effectively to ensure their financial well-being, while maintaining rents at a level that tenants can afford to pay.”

On housing development, the regulator’s analysis stated that “supply chain disruption and labour scarcity continues to add to the volatility. One result of these combined challenges is a reduction in the development plans of some registered social landlords (RSLs)”.

Development sales to registered social landlords and non-RSLs dropped by 56% to £11.36m, compared to £33.05m in 2022.

However, the prior year witnessed higher levels of sales activity as RSLs addressed deferred or delayed development projects due to the pandemic.

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The report notes that Scottish RSLs remain less dependent on sales to non-RSLs compared to other regions in the UK.

Data from the English Regulator of Social Housing published last month found that registered providers’ median interest cover fell by 54 percentage points to 128% compared to 2021, marking its lowest level since emerging from the recession in 2010.