Sovereign on course to deliver 30% build uplift

Housing association Sovereign said it is on course to deliver over 1,500 new homes this year – an increase of 30% on last year – despite facing rising costs and development delays.

The 61,000-home social landlord said in an update to the City that “ongoing economic challenges” were continuing to impact the organisation, with the organisation reporting a sharp drop in the value of its retained surplus in the three months to December 22, despite rising turnover.

Basingstoke-based Sovereign, which was last month among a number of associations to be hit by a credit rating downgrade by Moodys, said increased costs of labour, materials and energy and higher funding costs were all impacting on the organisation.

However, the landlord said it now expected to hand over 1,552 homes in the financial year to the end of March, which if achieved would be an increase of 30% on the 1,196 built in 2021/22. Most of these would be for social rent, it said. In its third quarter trading update, published late last week, it said it had completed 412 homes between October and December, up 37% on the year before, after having recently completed sales of its Stanshawe and Belmont Private Rental units in Reading.

Sovereign said that housing sales and shared ownership staircasing activities had been “favourable”. It added: “Confidence in our Shared Ownership product remains high, with demand and pipeline still strong”, and said market conditions were “evolving”.

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The landlord reported a retained surplus of £14.3m for the quarter, down 27% on the year before, on turnover of £113m, up 6% year-on-year.

Sovereign said it was continuing to “underperform” against its internal “golden rule” financial targets around its operating margin, which had fallen below the expected 30%. It said: “We do not expect this to recover in the short term as this is driven by the combination of continued cost pressures the business is experiencing across our property services, and increased spend in our Transformation programme, the benefits of which will support longer term performance improvement of the business.”

Last November Sovereign was also among a number of major landlords to be downgraded by the social housing regulator for financial viability reasons, given the darkening economic climate and need to invest in existing stock.