Special report: how do housing associations’ finances compare to others?

Insight05 Dec 2019Chloe Stothart

Our accounts digest finds that housing associations’ pre-tax surpluses have fallen for the second year running, driven by a drop in sales profits and surpluses from social rent. Chloe Stothart reports

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Pre-tax surpluses for housing associations (HAs) in the UK fell in 2019 for the second year in a row as sales profits and surpluses from social rent dropped.

The surplus for the 207 landlords in this report fell by 3.8 per cent to £3.6bn. Two-thirds of the 151 English HAs in the report saw their pre-tax surplus fall in 2019 to give a total in England of £3.4bn, which was a drop of four per cent.

Together Housing saw the largest percentage fall in pre-tax surplus and the biggest overall loss of the HAs in this report with a deficit of £19.8m in 2019. The main cause was breakage costs as part of a refinancing in October 2018. However, spending on fire safety measures also contributed.

Breakage costs were also a factor for Phoenix Community Housing, which had the largest percentage rise in surplus, mainly because refinancing costs had contributed to it making a loss in 2018.

Refinancing costs affected the surpluses of several HAs in 2018 and 2019, which reflects significant borrowing in the period as HAs take advantage of historically low interest rates.

L&Q had the largest pre-tax surplus even though it was down 45 per cent on 2018, followed by Clarion and Peabody, both of which also saw their surpluses fall in 2019.

Sector surplus falls as sales margins drop and HAs invest in new supply

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UK housing associations see fall in surpluses

This report sets out financial results for the HAs that hold the most units in their category across England, Scotland, Wales and Northern Ireland. The definition of traditional, mixed group and large-scale voluntary transfer (LSVT) associations in England for this report is the one used by the Regulator of Social Housing (RSH) in the 2017 global accounts.

The RSH defines an association as LSVT when it obtained more than half its units on the date of transfer from the transfer deal, otherwise it would be classed as traditional. It would also be categorised as an LSVT if all its constituent entities were stock transfers. Mixed groups contain stock transfer and traditional entities.

In the past Social Housing’s mixed category was for HAs that either had a mix of LSVT and traditional associations in their group or had income from first tranche or market sales. However this definition would now cover almost all associations in this report because 90 per cent of the English HAs covered had income from first tranche sales in 2019.

All the HAs in this report use the FRS 102 accounting standard apart from Sanctuary, which uses EU IFRS. It can produce some very different numbers, such as for interest cover and gearing, which are not really comparable with those generated under FRS 102, so we have omitted them for Sanctuary Scotland. For Sanctuary Group, like other organisations in England, we have used the metrics it states in its accounts for the RSH’s value for money figures.

Sales market slowdown

Much has been made of a slowdown in the housing market, particularly in London in the later part of 2018/19.

Profits from development for sale in England dived 42 per cent, while first tranche surpluses held up a bit better, rising four per cent.

One Housing reported a loss on properties for sale of £9.6m in 2019 from a profit of £6.6m in 2018 and a drop in its surplus on first tranche sales to £7.6m from £13m.

L&Q also said it had been hit by the sales slowdown. It made a loss of £9m on market sales, down from a profit of £28m the year before, and its surplus on first tranche sales fell to £16m from £27m. It still made the second-largest surplus on first tranche sales of the associations in this report despite the fall.

UK housing associations: audited accounts 2018/19 summary

		Income and expenditure account							Balance sheet			Financial ratios
England	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
60 LSVT	663,648	3,659	(2,718)	26%	(511)	158	682	19%	25,473	12,106	18,242	56%	196%
32 Mixed	1,035,723	6,188	(4,484)	28%	(950)	224	1,105	18%	51,140	22,672	21,890	52%	180%
59 Traditional	1,262,028	9,706	(7,347)	24%	(1,423)	446	1,575	16%	91,855	39,282	31,126	51%	181%
151 Total England	2,961,399	19,553	(14,549)	26%	(2,884)	828.3	3,362.4	17%	168,467	74,060	25,009	52%	183%

		Income and expenditure account							Balance sheet			Financial ratios
Scotland	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
1 Wheatley	50,635	334	(267)	20%	(57)	0	(5)	(2%)	2,246	1,213	23,959	64%	235%
5 LSVT	29,010	133	(111)	17%	(14)	(1.8)	14.2	11%	829	330	11,372	45%	51%
20 Traditional	95,177	559	(440)	21%	(55)	5	75	14%	5,150	1,545	16,232	32%	230%
26 Total Scotland	174,822	1,026	(817)	20%	(127)	3.0	84.5	8.2%	8,225	3,088	17,664	41%	213%

		Income and expenditure account							Balance sheet			Financial ratios
Wales	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
5 LSVT	44,486	233	(193)	17%	(25)	11.6	28.6	12%	1,291	373	8,393	47%	247%
20 Traditional	89,041	613	(483)	21%	(86)	3.8	47.0	8%	6,199	2,277	25,577	43%	171%
25 Total Wales	133,527	845	(676)	20%	(110)	15.4	75.6	9%	7,490	2,651	19,852	44%	188%

		Income and expenditure account							Balance sheet			Financial ratios
Northern Ireland	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
5	42,927	286	(225)	21%	(29)	1.1	31.6	11%	3,465	940	21,893	29%	217%

207 UK total	3,312,675	21,710	(16,267)	25%	(3,150)	848	3,554	16%	187,648	80,739	24,373	51%	183%

Clarion said its reduction in open market sales profits from a £12.5m profit to a £3.4m loss reflected a slight drop in the number of homes sold from 106 to 97, and lower margins of 17 per cent in 2019 – down from 30 per cent the year before because of “tougher market conditions”. It also had a smaller drop in first tranche profits of £800,000 to £15.7m despite a rise in the number of homes sold from 410 to 489.

Peabody made the largest surplus on market and first tranche sales despite falls of 38 per cent and 29 per cent respectively.

Ian Johnson, chief financial officer at Metropolitan Thames Valley Housing (MTVH) and chair of the G15 finance directors’ group, said: “Inevitably, lower profits from sales reduce the amount available for the cross-subsidisation of affordable homes, specifically social rented homes, and therefore this may cause HAs to consider reining in their development plans.”

He said that in 2019/20, prices for MTVH’s homes were generally holding steady up to the £600,000 maximum price eligible for Help to Buy loans but above that level it was “a bit harder and slower”.

“In London that would be more relevant because more homes are above that,” he added.

Fire safety works and major repairs

Spending on fire safety work following the Grenfell Tower disaster began in 2018, but continued into 2019. Jonathan Pryor, partner at auditor Smith & Williamson, said this would lead to higher major repairs capitalisation, early writing-off of components and higher depreciation charges in the light of expected replacements of materials such as cladding.

England: audited accounts of largest 32 mixed-business registered provider groups

		Income and expenditure account							Balance sheet			Financial ratios
2018/19	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
Onward Homes	34,786	147	(112)	24%	(24)	2.8	15.2	10%	1,164	300	8,611	24%	151%
Thirteen Group	33,858	180	(148)	18%	(10)	2.4	23.1	13%	1,086	241	7,107	23%	251%
Torus	37,561	194	(141)	27%	(20)	5.1	33.4	17%	993	297	7,895	24%	329%
Wythenshawe Community Housing Group	13,677	68	(62)	10%	(5)	3.7	6.1	9%	374	114	8,344	30%	242%
One Manchester	12,076	58	(41)	29%	(8)	6.3	16.2	28%	254	124	10,260	58%	162%
Your Housing Group	27,730	149	(119)	20%	(15)	4.8	22.1	15%	1,140	342	12,326	34%	256%
Mosscare St Vincent’s	8,520	44	(32)	29%	(8)	0.8	6.5	15%	388	149	17,533	38%	196%
North Star	3,686	20	(14)	29%	(3)	0.2	1.7	9%	204	89	24,014	43%	189%
ForViva	23,365	148	(131)	12%	(10)	0.7	10.0	7%	487	170	7,279	42%	151%
Incommunities	23,200	98	(84)	15%	(16)	3.7	24.3	25%	456	306	13,185	68%	168%
The Wrekin Housing Group	13,339	82	(53)	36%	(21)	0.7	9.0	11%	627	379	28,380	63%	134%
Cottsway	4,823	33	(20)	40%	(9)	1.6	6.0	18%	336	192	39,809	58%	171%
Jigsaw Group	34,679	180	(125)	31%	(35)	4.2	25.0	14%	1,361	673	19,403	50%	207%
Platform Housing Group	44,317	274	(171)	38%	(43)	6.3	66.9	24%	2,574	1,164	26,266	44%	239%
Karbon	26,834	129	(98)	25%	(18)	1.7	6.0	5%	971	388	14,453	44%	206%
Peabody	56,678	565	(416)	26%	(60)	24.0	148.0	26%	6,304	2,199	38,798	38%	134%
Places for People	197,712	827.1	626.3	24.3	(141)	26.3	95.5	12%	5,260	2,927	14,803	78%	134%
Vivid	30,521	250	(148)	41%	(34)	4.9	73.1	29%	2,181	1,075	35,210	53%	250%
Optivo	45,056	314	(223)	29%	(43)	12.6	87.6	28%	3,141	1,275	28,299	44%	192%
Stonewater	32,354	191	(134)	30%	(34)	9.4	22.4	12%	1,939	918	28,372	45%	133%
Radian	23,035	168	(109)	35%	(36)	5.6	31.5	19%	1,648	838	36,360	55%	192%
Citizen (WM Housing)	30,816	154	(111)	27%	(27)	1.8	21.0	14%	1,298	617	20,030	44%	184%
Longhurst Group	22,778	167	(118)	29%	(29)	1.6	21.9	13%	1,209	587	25,768	49%	173%
RHP	10,407	58	(38)	35%	(8)	0.7	13.1	23%	407	227	21,847	59%	216%
Plus Dane	13,681	74	(61)	18%	(12)	0.8	1.1	1%	621	297	21,733	41%	155%
Rooftop	6,674	42	(25)	39%	(9)	0.5	7.9	19%	371	223	33,364	61%	182%
Bernicia	14,654	74	(56)	24%	(7)	1.7	12.9	17%	512	132	8,991	27%	223%
GreenSquare Group	12,056	81	(60)	26%	(16)	2.2	7.4	9%	867	438	36,317	46%	138%
Grand Union Housing Group	11,921	74	(48)	35%	(14)	2.6	15.8	21%	648	295	24,754	46%	176%
Hyde	48,796	450	(334)	26%	(82)	53.8	110.2	24%	3,417	1,598	32,746	51%	143%
Clarion Housing Group	125,881	816	(567)	31%	(141)	30.1	153.5	19%	8,371	3,869	30,735	53%	134%
Progress Housing Group	10,252	78	(59)	24%	(9)	0.7	10.9	14%	531	232	22,664	45%	261%
Total	1,035,723	6,188	(4,484)	28%	(950)	224	1,105	18%	51,140	22,672	21,890	52%	180%

The depreciation charge for the year and capitalised major repairs rose in 2019.

A number of HAs mentioned increased spending on fire safety, including One Housing Group and Together, the latter of which paid for a waking watch and improvements to blocks. But there were other reasons for increased major repairs spend, such as improvement programmes.

EBITDA MRI interest cover

Falls in operating surpluses caused by matters such as drops in sales and the rent reduction, and increases in spending, for example on fire safety, were cited as reasons for a fall in interest cover.

Of the G15 group of London’s largest housing associations, Optivo, A2Dominion, L&Q, Catalyst and One Housing Group all mentioned the slowdown in the sales market as a factor in their reduced EBITDA MRI interest cover results.

MTVH’s EBITDA MRI interest cover dropped to 124 per cent from 159 per cent because of the rent reduction, increased interest payable and investment in homes.

England: audited accounts of largest 59 traditional registered providers

		Income and expenditure account							Balance sheet			Financial ratios
2018/19	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover, %	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
Castles and Coasts	7,056	34.9	25.0	28.0	(4)	0.5	6.2	18%	259	76	10,742	29%	236%
Anchor Hanover	53,441	526.4	468.5	11.0	(24)	(1.0)	35.6	7%	1,483	536	10,024	34%	431%
PA Housing	23,059	159.5	105.6	33.8	(30)	8.1	38.7	24%	1,789	712	30,885	40%	169%
Regenda	13,003	68.9	53.3	22.6	(8)	3.0	10.3	15%	532	192	14,799	37%	145%
Newlon Housing Trust	7,836	80.3	54.7	31.8	(15)	7.2	18.2	23%	1,167	553	70,535	48%	132%
Westward	7,536	40.2	28.0	30.4	(5)	1.8	8.6	21%	383	130	17,276	32%	208%
Shepherds Bush Housing Group	5,109	43.2	31.5	27.1	(5)	0.5	8.6	20%	477	167	32,745	38%	211%
Trident Group	3,386	33.3	28.0	15.7	(3)	0.3	2.5	8%	168	80	23,713	49%	197%
Colne	3,288	20.3	12.8	37.0	(4)	0.1	3.7	18%	239	129	39,375	54%	303%
Impact Housing	3,067	20.4	17.2	15.7	(11)	0.2	7.7	38%	156	73	23,795	48%	195%
EMH Group	19,599	103.8	72.9	29.8	(19)	4.0	15.9	15%	887	434	22,135	51%	184%
Swan Housing Association	10,905	81.1	58.8	27.5	(15)	3.10	9.8	12%	1,032	619	56,794	71%	125%
Nottingham Community Housing Association	9,415	77.1	61.6	20.1	(11)	4.2	8.5	11%	608	267	28,371	43%	162%
Irwell Valley Housing	7,675	35.9	27.2	24.2	(5)	0.6	4.2	11.6%	327	136	17,766	41%	146%
Wandle	7,500	68.6	47.0	31.4	(13)	8.6	18.8	27%	904	307	40,896	33%	150%
SYHA	5,753	48.7	42.4	12.9	(5)	1.0	2.3	5%	332	134	23,273	41%	124%
Hexagon	4,430	41.6	32.7	21.2	(5)	3.1	6.8	16%	480	195	44,128	40%	171%
Salvation Army Housing Association	4,154	36.1	32.8	9.4	(2)	0.1	1.8	5%	200	31	7,373	13%	227%
Bournville Village Trust	3,977	27.4	22.2	18.8	(5)	1.1	4.1	15%	186	98	24,524	63%	144%
Orwell Housing†	3,835	38.5	30.6	20.6	(3)	0.3	4.0	10%	233	88	22,918	39%	206%
Connect Housing	3,484	20.4	16.6	18.9	(2)	0.31	2.2	11%	137	48	13,727	36%	213%
Staffordshire Housing Association	3,144	21.5	16.6	23.0	(3)	(0.1)	2.2	10%	159	69	21,903	42%	174%
Notting Hill Genesis	65,458	670.6	534.1	20.4	(109)	34.0	105.3	16%	8,483	3,576	54,634	50%	143%
The Guinness Partnership	64,944	360.5	274.7	23.8	(67)	70.0	92.6	26%	3,450	1,250	19,249	41%	148%
LiveWest	37,329	232.9	166.7	28.4	(24)	15.3	56.0	24%	2,149	806	21,597	40%	267%
Hastoe Group	7,630	32.8	20.4	37.8	(11)	1.7	2.7	8%	450	251	32,910	56%	116%
Broadland Housing	5,118	29.0	21.4	26.4	(6)	0.2	2.0	7%	322	169	33,020	52%	145%
Housing & Care 21	21,009	186.4	150.6	19.2	(27)	1.0	18.1	10%	1,506	602	28,660	34%	151%
Sanctuary Group*	101218	735.4	557.5	24.2	(130)	22.7	76.9	10%	4,088	2,816	27816	52%	121%
Moat	20,636	130.4	92.8	28.9	(19)	11.4	36.3	28%	1,598	512	24,834	35%	208%
Metropolitan Thames Valley Housing	57,043	410.8	298.1	27.5	(77)	31.2	6.5	2%	4,905	2,011	35,254	42%	124%
Catalyst	20,898	180.1	134.8	25.2	(25)	12.0	30.0	17%	2,493	687	32,878	30%	154%
Octavia Housing	5,087	58.7	48.8	17.0	(6)	2.8	6.5	11%	566	211	41,392	38%	165%
Origin Housing	6,690	56.1	40.5	27.9	(14)	3.1	12.3	22%	796	357	53,300	47%	75%
Equity Housing Group	4,862	24.1	19.1	20.5	(2)	0.9	3.5	14%	215	51	10,529	24%	198%
Johnnie Johnson Housing	4,921	24.2	19.3	20.3	(3)	1.1	2.8	12%	140	65	13,257	43%	166%
Hightown Housing Association	6,383	84.7	58.6	30.9	(11)	3.3	18.7	22%	759	444	69,604	55%	248%
Muir Group	5,616	30.4	23.2	23.7	(3)	0.6	4.9	16%	230	68	12,122	27%	286%
Home Group	55,424	367.3	287.0	21.9	(44)	5.9	47.0	13%	2,822	1,218	21,981	48%	189%
Estuary Housing	4,511	40.3	30.0	25.5	(7)	1.8	3.6	9%	441	212	46,926	54%	165%
Sovereign	57,987	402.1	261.8	34.9	(56)	6.6	98.9	25%	4,002	1,709	29,472	45%	245%
Orbit	43,470	316.4	229.9	27.3	(47)	29.9	42.1	13%	2,892	1,425	32,777	51%	100%
Paradigm	14,908	130.1	82.2	36.8	(29)	5.9	25.2	19%	1,375	698	46,807	54%	163%
A2Dominion	38,133	372.2	318.6	14.4	(60)	9.7	25.5	7%	3,918	1,618	42,433	55%	88%
Bromford	43,674	256.7	179.9	29.9	(39.7)	6.6	69.1	27%	2,584	1,182	27,065	39%	182%
Great Places Housing Group	19,305	109.1	76.4	30.0	(25)	3.6	13.5	12%	1,203	548	28,373	46%	146%
Midland Heart	33,454	219.3	151.5	30.9	(25)	8.8	53.5	24%	1,654	530	15,830	30%	283%
Accent Group	20,623	94.9	74.4	21.7	(15)	0.6	52.8	56%	741	315	15,256	40%	168%
L&Q	95,539	937.0	739.0	21.1	(111)	50.0	186.0	20%	12,523	4,992	52,251	46%	166%
Yorkshire Housing	16,697	113.0	80.2	29.1	(18)	1.6	18.0	16%	983	451	27,023	47%	178%
Riverside	56,089	364.3	296.7	18.5	(48)	11.9	27.0	7%	2,360	860	15,339	38%	159%
Southern Housing Group	28,334	230.5	168.6	26.9	(34)	9.7	39.4	17%	2,256	845	29,805	37%	158%
Network Homes	21,235	275.1	178.0	35.3	(27)	7.4	72.1	26%	2,107	941	44,309	44%	285%
One Housing	16,308	213.3	182.4	14.4	(32)	15.4	20.1	9%	2,229	1,002	61,466	49%	83%
Habinteg	3,391	22.9	16.9	26.3	(3)	0.020	2.3	10%	211	43	12,822	18%	247%
Leeds Federated	4,304	26.0	19.4	25.3	(3)	0.9	6.2	24%	212	48	11,205	24%	340%
Aldwyck	11,150	95.8	63.6	33.6	(19)	0.0	32.8	34%	803	443	39,713	62%	134%
BPHA	18,721	124.5	71.4	42.6	(34)	10.9	34.1	27%	1,291	787	42,044	66%	156%
Accord	13,277	119.6	92.3	22.8	(17)	0.5	10.2	9%	956	464	34,981	50%	158%
Total	1,262,028	9,706	(7,347)	24%	(1,423)	446	1,575	16%	91,855	39,282	31,126	51%	181%

Salix Homes had the largest drop in its EBITDA MRI from -90 per cent to -788 per cent. Salix said its figure would remain lower than its peer group average in 2019/20 because it is investing in Decent Homes. It is a relatively new stock transfer that took place in 2015 so its EBITDA MRI will be affected by high levels of investment to meet transfer promises.

Cobalt had the highest interest cover, which it attributed to low levels of borrowing and costs.

Pensions

The major change in the 2019 accounts was each HA stating the share of its liabilities in the Social Housing Pension Scheme (SHPS) or the Scottish Housing Associations’ Pension Scheme.

Mr Pryor said that the change in accounting treatment had led to significant increases in pension provisions, which for most providers had limited impact on the overall financial position of the association due to historically high levels of reserves. He added that, on the other hand, there would be less volatility in the surpluses recorded in the income statement because changes to the schedule of contributions to remedy the deficit would no longer be reflected as an expense.

The increase in pension liabilities is easy to see because the 2018 figures were not restated to reflect the rule change. The 151 English HAs in this report saw a collective 66 per cent rise in pension liabilities reaching £2.8bn in 2019.

England: audited accounts of largest 60 LSVT registered providers

		Income and expenditure account							Balance sheet			Financial ratios
2018/19	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover, %	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
Together Housing Group	36,512	177.5	154.6	13%	(27)	5.1	(19.8)	(11%)	1,153	582	15,953	56%	54%
WDH	31,439	155.6	124.5	20%	(19)	2.73	14.9	10%	849	420	13,343	47%	193%
Gentoo	29,952	177.1	142.7	19%	(25)	2.1	13.2	7%	1,173	542	18,098	52%	150%
Flagship Group	28,207	155.7	101.4	35%	(24)	5.9	131.6	85%	1,720	699	24,787	38%	222%
Believe (County Durham Housing Group)	18,315	66.6	49.2	26%	(6)	5.0	16.7	25%	218	115	6,279	45%	107%
Bolton at Home	17,580	83.1	73.0	12%	(4)	3.9	5.3	6%	182	30	1,706	9%	(86%)
Plymouth Community Homes	15,961	80.2	64.5	19%	(4)	0.6	12.9	16%	579	111	6,961	19%	308%
Knowsley Housing Trust	13,251	68.2	57.1	16%	(8)	3.3	3.3	5%	263	187	14,124	67%	185%
Curo	13,222	93.2	66.3	29%	(10)	2.4	19.4	21%	612	273	20,683	52%	291%
Rochdale Boroughwide Housing	12,923	56.2	41.7	26%	(3)	3.3	15.0	27%	176	43	3,305	17%	436%
Housing Plus Group	12,194	62.6	46.0	27%	(16)	1.4	2.0	3%	395	283	23,237	77%	126%
First Choice Homes Oldham	11,445	49.8	39.6	21%	(3)	1.7	7.5	15%	239	25	2,204	9%	(20%)
Greenfields Community Housing	8,740	47.6	30.6	36%	(7)	0.3	11.0	23%	372	156	17,849	37%	287%
Vale of Aylesbury Housing	8,313	49.9	38.6	23%	(5)	0.6	7.4	15%	316	119	14,290	40%	284%
Silva (Bracknell Forest Homes)	7,533	45.3	32.8	28%	(6)	0.9	7.7	17%	461	149	19,780	31%	221%
Halton Housing Trust	7,295	36.7	27.5	25%	(6)	1.2	4.0	11%	206	134	18,406	81%	146%
Raven Housing Trust	6,757	44.5	29.7	33%	(7)	1.6	11.6	26%	356	217	32,055	67%	194%
Red Kite Community Housing	6,497	34.7	25.5	27%	(3)	0.8	8.9	26%	226	79	12,233	26%	207%
Lincolnshire Housing Partnership	12,552	53.6	44.8	16%	(11)	1.0	(1.1)	(2%)	294	152	12,110	51%	43.23%
Calico	5,045	22.4	16.8	25%	(4)	1.2	2.7	12%	130	110	21,843	93%	130.2%
One Vision Housing	13,235	60.4	48.3	20%	(8)	1.4	6.9	11%	271	178	13,486	71%	148.26%
Magenta Living	12,705	67.3	61.7	8%	(4)	1.9	8.4	13%	245	81	6,383	35%	453.6%
Beyond Housing	15,097	73.7	57.4	22%	(11)	1.6	6.8	9%	374	200	13,248	54%	192%
Connexus (Shropshire Housing)	10,693	60.4	45.3	25%	(9)	2.1	8.4	14%	394	223	20,827	63%	168.27%
Yarlington Housing Group	10,409	63.9	44.9	30%	(8)	2.9	14.1	22%	579	220	21,178	30%	221.3%
Futures Housing Group	10,010	50.6	33.5	34%	(9)	1.2	11.2	22%	302	219	21,832	81%	218%
Livin	8,408	34.5	25.0	28%	(5)	1.2	23.3	67%	147	91	10,823	68%	29.5%
Acis Group	7,400	33.6	23.1	31%	(6)	0.3	4.5	13%	270	184	24,842	68%	160.4%
Havebury Housing Partnership	6,569	42.1	29.0	31%	(9)	0.8	5.3	13%	350	186	28,290	54%	154%
Southway Housing Trust	6,201	31.7	24.2	24%	(3)	2.8	7.2	23%	164	54	8,636	29%	301%
Community Gateway Association	6,632	28.6	20.2	29%	(4)	0.7	5.1	18%	182	73	10,983	42%	240%
The Community Housing Group	6,062	39.2	29.2	25%	(7)	1.3	3.9	10%	226	150	24,699	69%	112.36%
Cobalt Housing Limited	5,942	27.5	20.9	24%	(2)	1.5	6.0	22%	175	30	5,049	5%	549%
Trent & Dove Housing	6,154	30.9	20.5	34%	(5)	1.7	7.4	24%	187	110	17,875	59%	242%
Housing Solutions	5,713	45.8	27.4	40%	(13)	1.2	3.3	7%	575	291	50,897	51%	145.73%
Cheshire Peaks & Plains	5,268	29.7	20.2	32%	(4)	0.7	6.0	20%	151	77	14,681	52%	194%
Salix Homes	8,716	38.9	30.5	22%	(2)	2.5	6.6	17%	227	37	4,209	28%	(788%)
Soha Housing	6,939	48.7	30.0	38%	(10)	2.3	10.9	22%	576	224	32,341	39%	198.8%
Poplar Harca	9,485	75.0	49.0	35%	(13)	33.9	47.9	64%	564	272	28,658	48%	218%
Town and Country Housing	8,962	64.7	38.6	40%	(14)	4.0	16.2	25%	824	384	42,826	48%	191%
Saxon Weald	6,635	46.0	29.3	36%	(12)	1.1	6.3	14%	355	222	33,391	68%	132%
CHP	10,055	65.4	46.7	29%	(17)	1.6	2.6	4%	690	434	43,114	63%	141%
Weaver Vale Housing Trust	6,248	32.5	25.1	23%	(3)	1.1	0.6	2%	111	65	10,347	61%	236%
Settle (North Hertfordshire Homes)	9,385	68.0	48.7	28%	(11)	1.8	10.5	15%	466	283	30,169	59%	209%
WHG	21,065	108.6	77.0	29%	(20)	6.8	18.8	17%	605	406	19,296	65%	151%
Aster Group	30,791	211.9	152.3	28%	(28)	17.6	55.0	26%	1,821	960	31,193	52%	222.8%
Trafford Housing Trust	8,966	57.1	49.9	13%	(7)	3.8	4.4	8%	273	177	19,685	86%	201.12%
Stafford & Rural Homes	6,365	31.1	20.9	33%	(4)	1.2	7.8	25%	201	80	12,569	36%	267%
Alliance Homes Group	6,610	43.7	32.8	25%	(2)	0.3	2.4	6%	192	90	13,623	40%	124.6%
Freebridge Community Housing	6,811	31.0	23.7	23%	(2)	0.8	5.9	19%	122	53	7,708	34%	369%
Ongo	10,182	45.0	34.0	24%	(3)	1.0	9.4	21%	207	59	5,819	24%	377%
Watford Community Housing	5,355	34.9	23.6	32%	(6)	0.2	5.9	17%	317	155	28,991	44%	182%
Phoenix Community Housing	6,253	33.1	25.8	22%	(3)	1.5	6.1	18%	238	80	12,714	30%	239%
West Kent Housing Association†	7,308	52.7	34.3	35%	(7)	1.3	12.5	24%	635	252	34,446	36%	238%
Broadacres Housing Association	6,316	43.7	33.8	23%	(6)	(0.3)	3.5	8%	338	136	21,582	41%	205%
Selwood Housing	6,560	41.6	28.6	31%	(3)	1.6	11.8	28%	445	153	23,296	30%	464%
Magna Housing	8,973	45.8	33.1	28%	(5)	3.3	11.0	24%	386	127	14,190	29%	322.4%
Golding Homes	7,579	50.9	37.4	26%	(6.6)	0.7	7.9	15%	476	212	27,960	41%	248.4%
Saffron Housing Trust	6,394	36.1	24.9	31%	(9)	0.5	2.7	8%	284	166	25,916	53%	133.4%
Cross Keys Homes	11,464	72.6	50.7	30%	(13)	1.2	13.5	19%	607	287	25,025	49%	210%
Total	663,648	3659.4	2718.3	26%	(511)	158	682.1	19%	25,473	12,106	18,242	56%	196.26%

The Guinness Partnership had the largest rise in its pension provision from £5.6m to £91.7m because of the switch to defined benefit accounting for SHPS, in which it had a liability of £86.8m in 2019. But the provision was more than offset by a rise in current assets so that reserves still increased – albeit by a much smaller amount.

The Scottish HAs in this report also saw an overall rise in their collective pension liability in 2019, which grew by 111 per cent to £97m.

The biggest rises in pension provision in Scotland and Wales were at Bield and Pennaf, respectively, and both were down to the recognition of SHPS on the balance sheet in 2019.

LSVT

Gearing held steady across LSVT associations, although this ranged from 92.8 per cent at Calico to 5.2 per cent at Cobalt. Cobalt said that its gearing was below budget because a major property purchase did not go ahead and the seller withdrew, but that it will rise in 2020/21 as developments start.

Calico said its gearing figure was high as a result of “initial full costs of assets at transfer, our continuing reinvestment, new development and growth”.

Scotland: audited accounts of largest 26 RSLs

		Income and expenditure account							Balance sheet			Financial ratios
2018/19 Traditional	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover, %	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
North Glasgow HA	5,424	25	(23)	6%	(1.1)	0.0	0.4	1%	116	26	4,863	28%	452%
Hanover (Scotland) HA	5,419	38	(34)	10%	(1.5)	(0.1)	2.1	5.7%	178	35	6,450	21%	222%
Bield Housing & Care	4,614	42	(40)	6%	(0.4)	(0.0)	2.6	6%	145	2	482	2%	758%
Caledonia HA	5,590	36	(30)	16%	(4.0)	(0.2)	7.6	21%	322	84	14,976	27%	169%
Kingdom	4,545	30	(22)	26%	(3.2)	0.1	5.0	17%	405	101	22,205	27%	271%
Thenue Housing	3,078	17	(12)	26%	(1.7)	0.0	1.1	7%	21	39	12,617	26%	294%
Maryhill Housing	3,054	13	(13)	4%	(0.8)	(0.1)	0.0	0%	66	12	3,811	20%	58%
Hillcrest Homes	8,867	53	(45)	16%	(5.8)	1.4	5.1	10%	542	173	19,456	37%	175%
Link Group	8,252	65	(54)	17%	(6.7)	0.0	4.5	7%	614	181	21,948	34%	217%
Castle Rock Edinvar	7,023	36	(19)	48%	(0.9)	0.2	16.7	46%	460	67	9,609	15%	902%
Sanctuary Scotland*	6,870	33	(16)	51%	(8.7)	(0.0)	8.0	24%	326	230	33,412	-	-
Home Group Scotland	4,187	23	(15)	34%	(2.2)	0.1	5.8	25%	277	88	21,012	32%	399%
Grampian HA	3,910	19	(14)	30%	(3.4)	0.2	3.9	20%	237	80	20,399	36%	186%
Clyde Valley HA	3,961	21	(15)	30%	(4.1)	0.1	2.7	13%	325	115	28,920	40%	170%
West of Scotland HA	3,546	19	(17)	14%	(1.7)	0.0	0.9	5%	218	61	17,313	29%	189%
Cairn	3,956	18	(16)	14%	(2.1)	0.2	2.0	11%	141	58	14,636	48%	235%
Albyn Housing	3,339	21	(16)	25%	(2.6)	(0.0)	2.6	13%	272	74	22,253	29%	158%
Langstane HA	3,031	16	(13)	21%	(1.9)	0.0	0.3	2%	158	47	15,549	31%	143%
Port of Leith HA	2,898	18	(14)	19%	(1.8)	0.9	2.5	14%	210	56	19,182	30%	190%
Govanhill HA	2,789	16	(14)	13%	(0.5)	2.0	1.5	10%	119	17	6,105	15%	47%
Total traditional	95,177	559	(440)	21%	(55.3)	4.8	75.5	14%	5,150	1,545	16,232	32%	230%

		Income and expenditure account							Balance sheet			Financial ratios
2018/19 LSVT	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover, %	Net interest, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
Dumfries and Galloway Housing Partnership	10,339	46	(34)	25%	(6.7)	0.0	4.9	11%	272	167	16,184	79%	195%
River Clyde Homes	5,681	27	(27)	(1%)	(3.5)	0.0	4.0	15%	203	78	13,731	39%	(286%)
Hebridean Housing Partnership	2,199	11	(8)	26%	(0.3)	(0.2)	2.4	21%	95	5	2,232	6%	(1,270%)
Scottish Borders Housing Association	5,649	23	(19)	15%	(1.7)	(1.5)	0.3	1%	82	28	4,886	39%	41%
Argyll Community Housing Association	5,142	26	(21)	17%	(1.8)	(0.1)	2.6	10%	177	52	10,123	31%	405%
Total LSVT	29,010	133	(111)	17%	(14.1)	(1.8)	14.2	11%	829	330	11,372	45%	51%

		Income and expenditure account							Balance sheet			Financial ratios
2018/19 Wheatley	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover, %	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
Wheatley	50,635	334	(267)	20%	(57.4)	0.0	(5.2)	(2%)	2,246	1,213	23,959	64%	235%

Total Scotland	174,822	1,026	(817)	20%	(126.8)	3.0	84.5	8%	8,225	3,088	17,664	41%	213%

Gearing for LSVTs was slightly higher than for other types of landlord because stock transfer organisations start out indebted as they borrow to improve properties as part of transfer promises. However, the debt eventually reduces and the difference in costs and gearing between transfers and traditional associations tends to disappear after about 12 years.

Mixed

Of the mixed associations, Places for People had the highest gearing of a mixed HA at 77.5 per cent. But it believes that the RSH’s chosen metric does not fully represent its activities as it excludes investment properties and investments in joint ventures, which would take its gearing down to 56.7 per cent.

Thirteen had the lowest gearing of the mixed groups at 23.3 per cent but it said it expects this to rise as it draws further loans. It includes stock transfers from Hartlepool and Stockton councils as well as traditional associations.

Northern Ireland: audited accounts of largest five housing associations

		Income and expenditure account							Balance sheet			Financial ratios
2018/19	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover, %	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
Apex	5,775	50.7	(41.5)	18%	(6.5)	0.56	2.2	4%	671	201	34,844	31%	104.82
Choice Housing Ireland	10,310	68.8	(52.3)	24%	(8.4)	0.51	8.6	13%	944	275	26,706	34%	235.58
Co-Ownership Housing	8,766	42.9	(35.5)	17%	(1.0)	(0.78)	6.1	14%	464	156	17,739	38%	829.94
Clanmil	5,035	34.3	(23.4)	32%	(5.3)	0.37	5.6	16%	513	153	30,477	32%	244.87
Radius	13,041	89.7	(72.2)	19%	(7.3)	0.45	9.1	10%	873	154	11,829	18%	287.22
Total Northern Ireland	42,927	286	(225)	21%	(29)	1.1	31.6	11%	3,465	940	21,893	29%	217%

Traditional

Swan had the highest gearing of the traditional HAs in England because of Greater London Authority loans, but it said it stress-tested its business plan and was “comfortable” with its level of debt. Its key covenants were not compromised and its gearing is set to decrease over three years, it said.

Salvation Army Housing Association had the lowest gearing at 13.4 per cent.

Scotland

The pre-tax surplus in Scotland fell by 1.1 per cent. Wheatley, Scotland’s largest association, had the biggest percentage fall, going from a £6.9m surplus in 2018 to a £5.3m deficit a year later. This was the result of a loss on revaluation of investment property and a movement in fair value of financial instruments.

Wales

In Wales, however, the pre-tax surplus rose 18 per cent. Traditional HA Wales & West had the largest percentage fall in pre-tax surplus of 104 per cent to a £0.3m deficit because of loan breakage costs and an exceptional pension charge in relation to the SHPS defined benefit scheme.

Wales: audited accounts of largest 25 RSLs

		Income and expenditure account							Balance sheet			Financial ratios
2018/19 Traditional	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover, %	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
Ateb Group	2,792	16	(10)	34%	(3.3)	0.02	4.5	28%	220	80	28,509	39%	139%
Cadwyn Housing Association	2,051	14	(12)	17%	(1.3)	0.03	1.0	7%	103	38	18,734	41%	156%
Cardiff Community	3,057	28	(24)	14%	(2.2)	0.11	2.3	8%	206	64	20,995	37%	118%
Grwp Cynefin	3,952	26	(21)	19%	(2.8)	0.17	1.7	6%	337	108	27,348	39%	192%
Hendre	6,097	55	(47)	15%	(5.0)	0.54	3.9	7%	384	129	21,153	44%	264%
Linc Cymru	4,489	38	(32)	17%	(4.4)	0.32	2.9	8%	354	139	31,005	48%	166%
Melin Homes	4,141	24	(21)	15%	(3.0)	0.00	0.7	3%	302	104	25,104	41%	218%
Merthyr Tydfil	1,134	6	(4)	24%	(0.6)	(0.03)	0.7	12%	68	13	11,843	23%	334%
Mid Wales HA	1,792	9	(6)	31%	(2.0)	0.00	0.7	8%	133	53	29,369	49%	169%
North Wales HA	2,670	16	(12)	28%	(2.9)	0.04	1.8	11%	175	57	21,435	35%	232%
United Welsh HA	5,879	36	(25)	32%	(8.5)	0.04	3.9	11%	544	209	35,568	47%	153%
Bro Myrddin HA	912	5	(4)	22%	(0.4)	0.07	0.8	15%	58	15	16,633	30%	380%
Cadarn	3,068	16	(12)	25%	(2.8)	0.25	1.8	11%	205	68	22,300	36%	224%
Coastal	5,814	35	(25)	29%	(6.6)	1.51	3.8	11%	448	173	29,833	45%	149%
Cynon Taf Community Housing Group	1,864	12	(10)	16%	(1.1)	0.00	0.8	7%	102	29	15,456	30%	201%
Family Housing Association (Wales)	2,855	22	(15)	29%	(4.6)	0.02	1.7	8%	208	78	27,251	40%	172%
Pennaf	5,998	43	(34)	22%	(7.2)	0.41	3.0	7%	433	206	34,286	53%	139%
Pobl	17,297	135	(112)	17%	(17.3)	(0.10)	10.2	8%	1136	463	26,788	51%	133%
Taff	1,440	12	(10)	21%	(1.4)	0.00	1.2	10%	117	36	25,327	35%	222%
Wales and West	11,739	64	(48)	25%	(8.2)	0.40	(0.3)	0%	667	213	18,185	36%	201%
Total traditional	89,041	613	(483)	21%	(85.6)	3.78	47.0	8%	6199	2277	25,577	43%	171%

		Income and expenditure account							Balance sheet			Financial ratios
2018/19 LSVT	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover, %	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
Cartrefi Cymunedol Gwynedd	6,303	35	(26)	24%	(3.8)	2.25	6.8	20%	163	69	10,897	47%	443%
Bron Afon Community Housing	8,085	46	(39)	14%	(3.5)	3.38	5.9	13%	392	84	10,433	52%	130%
Newport City Homes	9,655	49	(43)	11%	(6.0)	3.64	3.5	7%	178	63	6,525	49%	163%
Tai Tarian	9,537	49	(37)	24%	(7.4)	2.59	6.2	13%	373	90	9,483	48%	274%
Trivallis	10,906	54	(46)	15%	(3.8)	(0.28)	6.2	11%	185	67	6,135	40%	240%
Total LSVT	44,486	233	(193)	17%	(24.5)	11.57	28.6	12%	1291	373	8,393	47%	247%

		Income and expenditure account							Balance sheet			Financial ratios
2018/19 total	Number of units	Gross turnover, £m	Operating costs, £m	Operating surplus/turnover, %	Interest payable, £m	Surplus on sales, £m	Pre-tax surplus, £m	Pre-tax surplus/ turnover	Assets total, £m	Loans total, £m	Per unit, £	Gearing, %	EBITDA MRI interest cover
Total Wales	133,527	845	(676)	20%	(110.1)	15.35	75.6	9%	7490	2651	19,852	44%	188%

LSVT Bron Afon saw the biggest rise of 511 per cent to a surplus of £5.9m because of a bigger operating surplus and increased surplus on sale of fixed assets. Pobl, Wales’s largest association by units, had the largest pre-tax surplus overall at £10.2m.

Northern Ireland

The five Northern Irish HAs covered in this report saw a 23 per cent rise in their pre-tax surpluses. Radius, the largest association by units in Northern Ireland, had a rise of 46 per cent to £9.1m.

Co-Ownership, which provides only shared ownership housing, saw its pre-tax surplus rise 84 per cent to £6m, largely thanks to a £3m rise in turnover.

Future

2019 was the penultimate year of the four-year rent cut programme in England. The surplus from social rent dropped again in 2019 by six per cent, which follows a smaller fall in the previous year.

Landlords are now in the midst of the final year of rent reductions and freezes to working-age benefits, so the question is what impact a further year of cuts will have on their finances.

Additionally, Universal Credit continues to be rolled out. The worries about Universal Credit centre on arrears caused by the five-week wait for the first payment and delays in arranging payment directly to the landlord for tenants who are struggling to pay. So landlords face another year of financial challenges in 2019/20 until rents rise in the following financial year.

Mr Johnson said that associations will have built the rent cut into their plans.

But he added: “There are greater headwinds facing the sector that were not there in the first two years of the rent settlement. Then there was a more buoyant housing market and there are now rising property costs [related to fire safety work] and Universal Credit. So they combine to create a downward pressure on the surplus.”

Notes and definitions for tables

Mixed-business groups = groups containing both stock transfer and traditional HAs

Operating surplus/turnover = operating costs plus costs of sales as a percentage of turnover

Total assets = fixed assets plus current assets

Debt per unit = total loans, bonds, finance leases (over a year) and intercompany debt (over a year) divided by units

In England, EBITDA MRI interest cover and gearing are taken from the RSH’s value for money metrics in each HA’s accounts. In Wales, Scotland and Northern Ireland they have been calculated as follows: gearing = debt/net book value of housing

HAs with LSVT-type finance will usually have planned high levels of debt relative to assets including mixed groups with a significant LSVT presence

EBITDA MRI interest cover = (operating surplus - surplus on sales of fixed assets - amortised government grants - government grants taken to income) + interest receivable + total depreciation charge for period - capitalised major repairs and improvements/capitalised interest + interest payable

HAs carrying properties at valuation will not have any amortised grant

*Sanctuary was the only association to adopt EU IFRS rather than FRS 102. In England its gearing and EBITDA MRI interest cover figures are taken from its accounts. We have not calculated them for Sanctuary Scotland

Source of data: audited accounts for year ended March 2019, except (†) = December 2018.

Additional data research by Stefan James and Romana Lisica