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strength that government ministers will say justifies action to cut rent levels. Headlines from the 2014/15 accounts for HAs registered with the Homes & Communities Agency (HCA), have shown a social housing sector benefitting from a prolonged period of historically low interest rates and rising house prices. Profits from house sales in particular – whether through the sale of shared ownership tranches or from outright sales – have boomed. The 332 largest associations recorded a
combined surplus (the sector does not like using the term ‘profit’) of £3 billion for the first time, a whopping 25 per cent increase on the £2.4 billion reported for the previous year. Of this huge figure, one third came from just 20 of the largest stock-owning associations. Among the highlights from the combined or
global accounts:
• Surpluses from all property disposals rose to £501 million from £324 million
• Shared ownership sales surpluses rose by 64 per cent to £239 million
• New homes built increased by 3 per cent% to reach 46,500
• Sales and demolitions amounted to 16,356, down by 5 per cent
• Investment in improving the existing stock reached £1.9 billion
• Rental income rose to £12.2 billion from £11.6 billion
• Borrowing rose to £63.4 billion from £59.3 billion
• The average debt owed on each HA home increased 5 per cent to £23,931 These results will encourage the government to
seek more investment in housebuilding by HAs, as well as pushing for greater efficiencies and value for money. Some fear the Government might increase the annual 1per cent rent cuts to 1.5 or even 2 per cent, creating considerable savings in the Housing Benefit bill.
Surpluses defended
But HA chief executives and other social housing sector representatives have been quick to highlight that the vast majority of the surpluses are being invested into building more new homes and improving existing homes. They are telling the politicians and anyone else
who will listen, that the surpluses are necessary in order to borrow more money, to deliver on the Government’s demands that they ‘up their game’ and build many more homes for existing tenants and others to buy. Fiona MacGregor, the HCA’s Director of
Regulation said “The accounts illustrate the strong performance of the sector in 2013-14 continued into 2014-15. The sector has benefitted from a range of favourable economic conditions and it is encouraging to see the sector overall remained in a solid financial position.” The HCA published combined accounts for all
HA surpluses soar to record levels T
he combined surpluses of housing associations has leapt to an eye-watering £3 billion, showing a level of financial
registered housing associations in England for 2014/15. “Crucially, this meant that providers were able to
focus on the delivery of their key objectives, directing their surpluses and additional private finance into delivery of around 46,500 new homes and investing almost £2 billion into the existing housing stock.”
Efficiencies
Perhaps mindful of criticisms from Government ministers about their performance and aware of suggestions they might be sitting on the surpluses, David Orr from the National Housing Federation defended his members, saying “Because they have made efficiency improvements, associations are better equipped to deal with the challenging financial years ahead.” These challenges will include coping with the
annual 1 per cent cuts in rent levels through to 2020 and further cuts in their tenants’ welfare benefits, as the Government tries to balance its public expenditure books. Overall the sector’s turnover increased by 4.1
24 | HMM March 2016 |
www.housingmmonline.co.uk
per cent to over £16 billion. The majority of the increase came from the core social housing lettings activity, which was responsible for 84 per cent of turnover. The operating margin also increased from 26 per cent to 28 per cent as costs increased by less than revenues, supporting Mr Orr’s statement on efficiency improvements. Similarly there were a series of small
improvements in a number of operating measures as rent losses due to empty properties fell from 1.8 per cent to 1.7 per cent, bad debts fell from 1.0 per cent to 0.8 per cent and current tenant rent arrears fell from 4.7 per cent to 4.6 per cent. As the speed of welfare reforms being introduced ramps up it will be interesting to see if this trend can be continued in this year and next. However, this is unlikely to stop the government
from seeking further cuts in HA income from rents, while pushing them to increase output through building more homes for sale and rent. As regulator of the sector, the HCA will try to ensure these twin goals do not overstretch HA resources, making them vulnerable to future changes in financial conditions such as interest rate rises.
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