Housing association development spend 28% below forecast

English housing associations’ development spend was 28% below forecast in the three months to 30 September, according to the Regulator of Social Housing’s (RSH) latest quarterly survey.

Registered providers spent £3.2bn on building and acquiring homes in the quarter which was also 7% down on the previous quarter’s figure and below the average £3.4bn spent per quarter over the last three years. The rolling 12-month total spend fell for the third consecutive quarter to £13.7bn.

The RSH said: “In addition to general scheme delays, providers have experienced planning issues and legal delays entering into contract, and insolvency amongst contractors continues to be reported.

“Where delays have occurred, the majority of providers have re-profiled expenditure into the following four quarters, although in a minority of cases expenditure has been deferred for over a year. A small number of providers have also reported new developments being placed on hold as a result of uncertainty over the availability of grant funding.”

The survey also found that associations’ cash interest cover is forecast to fall to a record low of 70% next year due to rising repairs and maintenance expenditure and high interest costs. Interest cover compares earnings to interest payments and is used as a measure of financial capacity.

RSH said: “The continuing downward pressure on interest cover results from the large increases in interest payable and repairs costs that have been experienced in recent years.”

It said net interest payable has increased 24% to £0.8bn in the space of two years, while capitalised major repairs costs rose 39% to £0.9n. By comparison, net operating cashflows only increased by 12% to £0.7bn over the same timeframe.

Cash interest cover, excluding sales, did increase to 110% in the three months to 30 September due to large one-off receipts including a VAT refund, dividend payout, and receipt of customer rebate. Rolling interest cover also increased for the third quarter in a row to 85% for the year to 30 September.

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The survey also showed that market sales have increased from a record low level to 658 units but this is still substantially below the three-year average of 988 sales per quarter.

Providers spent £1.3bn on revenue repairs, which was 1% down quarter-on-quarter but in line with forecasts, while capitalised repairs rose 9% to £836m, which was still 21% below forecast.

The quarterly survey is based on regulatory returns from 201 providers who own or manage more than 1,000 homes.