Industry News


Covid enforced changes in service delivery and the slowing of maintenance and buildingworks boosted the finances ofHousing Associations last year


slower rates of expenditure, due to the impact of lockdowns onmaintenance and construction work. The average overall operatingmargin forHAs


A


improved during 2020/21 to 24.4 per cent, froma 2019/20 average of 23.6 per cent. Operatingmargins for social housing lettings grew from26.5 to 26.8 per cent over the same period. The findings fromdata analystHousemark are


based on the published 2020/21 financial statements of over 200 housing associations, including all registered providers with over 5,000 properties. The analysis has revealed:


• Increases inmargins relate primarily to decreases in expenditure linked to delays to major works programmes during the pandemic, as well as decreases in somemanagement cost sub-categories;


• The headline social housing cost per unit decreased froma 2019/20 average of £3,664 to a 2020/21 average of £3,565 – a drop of around 2.8 per cent;


• The decrease in overall unit costs is driven primarily by a 16 per cent drop inmajor works capital spend per unit, asmajor and cyclical programmes during the pandemic were paused or delayed;


• Around 40 per cent of housing associations recorded drops inmanagement expenditure, relating to precipitous falls in certain corporate cost lines. Notably expenditure in areas such as


2020/21 Operatingmargin overall (%)


Operatingmargin – social housing lettings (%) Headline social housing cost per unit (£) Gearing (%)


EBITDA MRI (%)


Units developed as a % of units owned Reinvestment (%)


Return on capital employed (%) 12 | HMMDecember/January 2022 | www.housingmmonline.co.uk


nalysis of social landlords’ financial statements for last year shows their operatingmargins improved as a result of


recruitment fees, legal fees, consultancy, and premises utilities was severelymuted during the pandemic;


• Reinvestment in new homes fell on average from 7.4 per cent to 5.9 as development programmes were delayed. New supply still increased by an average of 1.2 per cent, but this is down from1.6 per cent in the previous year; and


• Gearing decreased slightly across the sector and interest cover (EBITDA MRI) improved in line with bettermargins.


SHIFT TO DIGITAL SERVICES Although the 2020/21 figures have been largely driven by the decisions taken during the pandemic, when coupled withHousemark’s covid impact metrics andmonthly pulse data – which collectively covers 20months of both pandemic performance and recovery progress “it is apparent that the strongest performing providers have pivoted service delivery and spend towards increased resident engagement and digitalisation.” This increased focus has led to an acceleration of


digital first strategies with top performers now reporting that approximately 50 per cent of all customer contact is being delivered through digital channels, versus a pre pandemic sector average of around 20 per cent. Commenting on this, aHousemark spokesman


said: “As spend levels recover, those landlords delivering amore efficient, agile service aremore likely to be able to unlock greater capacity to tackle the complex challenges the sector faces.” Overall, social housing cost per unit increased by


LOWER QUARTILE 18.7 22.5


3,170 30.1 150 0.6 4


2.5


Asmajorworks programmes return to speed and landlords continue to invest in both building safety and decarbonisation of existing stock, unit costs are expected to increase


around £500 between 2017/18 and 2019/20 as landlords invested significantly in building safety. Operatingmargins today remain well below their 2017/18 average of 26.4 per cent, reflecting the multiple operating environment priorities. Asmajor works programmes return to speed and


landlords continue to invest in both building safety and decarbonisation of existing stock, unit costs are expected to increase further in 2021/22 applying further pressure on operatingmargins. Pressure is likely to be exacerbated by wider


factors such as the increasing cost ofmaterials and labour. Expenditure on information technology is also climbing as landlords continue to invest in systems integration, data quality, real-time reporting, and digital channel shift, althoughmany landlords are prioritising this investment to help unlock further financial capacity to tackle the current challenges the sector faces.


MEDIAN 24.4 26.8


3,565 42.6 189 1.2 5.9 3.3


UPPER QUARTILE 28.8 32.6


4,272 52.1 254 2


8.2 4.1


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