Operating margin of 200 largest social landlords falls to lowest since 2009, says regulator

The aggregate operating margin of social housing landlords fell to 16.6% in the last financial year, its lowest level since 2009, the Regulator of Social Housing (RSH) has revealed.

This represents a decrease of 2.9 percentage points, compared to the sector’s aggregate operating margin of 19.5% in 2022. The RSH said the economic conditions, combined with high levels of investment in existing stock, ”have led to the sector as a whole being stretched and financial resilience being tested.”

The RSH’s latest global accounts, which cover the year up to the end of March 2023, also found that housing providers’ interest cover deteriorated by 24 percentage points to 103%. Interest cover compares earnings to interest payments and is used as a measure of financial capacity. 

The RSH’s global accounts have shown that the level of interest cover has steadily declined since 2018, reaching its lowest point since 2010.

In total, 69% of providers reported interest cover of more than 100%. This is a decrease from 2022 when 76% of providers reported a figure greater than 100%.

The operating surplus generated by the sector fell by 9%, to £4.0bn. 

In the year ending March 2023, a record £7.7bn was spent on repairs and maintenance, a 20% increase on the £6.5bn spend reported in 2022.

Additionally, spending on new development increased by 11%, and the number of completed social homes increased by 7% compared to 2022. During the year to March 2023, 53,000 new social housing units were developed.

The RSH’s latest global accounts analysed the financial circumstances of 202 large provider groups which own or manage at least 1,000 social homes, representing over 95% of the social housing sector’s stock.

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Will Perry, director of strategy at RSH, said: “Social housing providers are grappling with a range of major external economic pressures. At the same time, they are spending record amounts on improving their tenants’ homes and fixing problems like damp and mould.

“Boards must remain clear-sighted about financial risks, and deploy appropriate mitigations, while building more and better social homes for people who need them.”