Paul Hackett tells Housing Today Live conference this is the “toughest time” for housing association finances he can remember

The chief executive of Southern Housing has said the housing association’s halt to new development beyond its committed programme will last until its cash interest cover has improved.

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Source: Olivia Barber

Paul Hackett, chief executive, Southern Housing

Speaking at Housing Today Live in Westminster this morning, Paul Hackett explained that, in his 35 years working in the sector, this was the “toughest time” for housing association finances since the introduction of mixed funding in 1988.

“Capacity has been depleted by four years of rent cuts and a cap at below inflation last year,” he said, explaining that Southern had increased repair and maintenance spending by 31% over the past two years.

He said this increased spending pressure, combined with the background funding constraints,  had “impacted our capacity for new development”.

“We’ll build out our 3,700-home contractually committed newbuild programme, but we won’t start any additional homes until our EBITDA-MRI cash interest cover has recovered towards the end of this parliament,” he said.

“This is not where we want to be.  But something has to give, and for the time being that’s new development.”

Hackett, who is also a regular Housing Today columnist, said the government had “a huge challenge” to address in social housing, saying that “on every level the system needs reform”.

>>See also: Southern stops committing to new developments as surplus falls

>>See also: Many housing associations’ earnings aren’t enough to cover costs – it’s grave news for housing delivery

He welcomed the news that the government was considering giving registered providers a 10-year CPI+1% rent settlement, which he said would “make a huge difference”, but said the reintroduction of rent convergence would be “fairer” while helping to build housing associations’ capacity over the long term.

Hackett also praised the National Housing Federation for identifying other levers that government could pull to increase affordable housing delivery, which includes the extension of the Building Safety Fund to social and affordable rented homes, an increase in the unit grant rate and duration of the Social Housing Decarbonisation Fund and Affordable Homes Programme and providing loan guarantees.

Hackett’s comments come as concern mounts in the social housing sector about interest cover being at historically low levels. Interest cover compares earnings to interest payments and is used as a measure of registered providers’ financial capacity 

In February the Regulator of Social Housing warned that the sector’s average interest cover had fallen to its lowest level for 14 years.