Special report: sector sees large rise in income from non-social housing

Non-social housing lettings

There was little movement on non-social housing lettings income from last year with a 2.5 per cent rise to £418m.

Non-social housing lettings as a share of total turnover stayed flat at 2.7 per cent. More than half of the associations examined for this report (84) generated income from non-social lettings. Acis had the highest proportion of non-social lettings as a share of its income – at 15 per cent.

Commercial rents and other income

Commercial rents and other income – which includes shops, garages and offices and a wide range of other activities such as market sales through joint ventures, care homes, solar panels and electricity generation, gas servicing, catering, sewerage, and maintenance services – had the largest rise on last year with 52 per cent. This was an increase of £277m to £810m.

While most organisations had relatively small changes in income from this source, a handful saw large swings. L&Q, for example, saw its income from land sales rise from £42m to £243m. Meanwhile Flagship’s income from gas servicing rose from £3.4m to £13.8m.

This contrasts somewhat to last year’s report, where commercial rents and other income dropped by nearly 21 per cent.

This revenue stream made up nearly half of the income of Brunelcare, a specialist provider of supported housing and care for older people, because it includes its income from care homes, which is a key part of its business.

Places for People also made the second-largest amount of money in the commercial rents and other income category because of its businesses managing leisure centres, property and retirement homes.

Sanctuary, which has a large care business, and L&Q, which bought the Gallagher Estates land business in February 2017 and had an income of £243m from land sales, made nearly a quarter of their income from commercial rents and other activity.

Other non-social activity

Other non-social housing activity – which mainly includes management and community services such as regeneration, consultancy and facilities or property management – was the only revenue stream that saw a decline (8.7 per cent). This was in contrast to last year’s report, which showed a strong increase of nearly 30 per cent.

This stream as a share of total turnover also decreased by 0.3 percentage points to 2.2 per cent. This was the smallest of the income streams from non-social housing looked at in this report.

Nacro, which provides supported housing and services, particularly for ex-offenders, made half of its £49m income from other non-social activity, including offender management and education.

Shared ownership rent

There was a rise in shared ownership rents as a share of turnover to 4.3 per cent, from 3.6 per cent the year before. This was due to a 21.2 per cent increase in shared ownership rent income.

Some comparable 2017 shared ownership rental income data is missing for a few organisations that merged in 2018. They include: PA Housing, formed from Paragon and Asra; Optivo, formed from Amicus Horizon and Viridian; LiveWest, formed from Devon & Cornwall and Knightstone; Connexus, formed from Shropshire Housing and Herefordshire Housing; and Vivid, formed from First Wessex and Sentinel. Places for People did not break out its income from shared ownership rents in 2017 or 2018. The majority of HAs examined for this report generated income from this source.

Shared ownership rents accounted for nearly 20 per cent of Thames Valley Housing’s income – that was the highest proportion for all the 120 HAs. The rest was made up of first tranche (nearly 30 per cent), with a small amount (1.96 per cent) from other non-social activity.

There were 21 HAs that reported no shared ownership rent, but the majority of these (15) made money from first tranche sales. It is also possible they included their shared ownership rent in their social housing rent figures.

Individual housing associations

The ExtraCare Charitable Trust had the greatest percentage of turnover coming from non-social housing, at 86 per cent, topping Brunelcare which had previously been in this spot. As mentioned, both provide care services, which could explain this figure.

Other HAs deriving large amounts of income from non-social housing were highly active in the open market sales and shared ownership sectors. These include Places for People, L&Q, Catalyst and Thames Valley.

Extra care provider Orwell Housing, in Suffolk, was the only HA to have less than 10 per cent (two per cent) of its income from non-social housing and the bulk of this was from shared ownership. This had decreased on last year’s figures of four per cent.

In contrast, Orbit saw an increase from 37 per cent to nearly 43 per cent. The bulk of this was from first tranche sales (nearly 21 per cent) and open market sales (16 per cent). Smaller amounts were gained from shared ownership rent and other non-social income.

Ten associations with their largest proportion of income from sources other than social housing in 2018/19

Social Housing has also looked at the HAs that have released their 2018/19 accounts for this report (taking into account that most have yet to release their financial statements). The majority of the HAs here are operational in London and the South of England.

L&Q topped this list for non-social housing as a share of total turnover, although the figure had fallen since 2018. It also had the highest turnover at £937m. Commercial rents and other activity made up 18 per cent of its income.

Four of the HAs saw a decrease in non-social housing as a share of turnover, including Settle, which went from more than 29 per cent to nearly 22 per cent.

Future

A weakening in the housing sales market is beginning to have an effect on London and South East associations, according to Fiona MacGregor, chief executive of the Regulator of Social Housing (RSH).

In the RSH’s latest quarterly survey, published on 12 September, she warned providers to consider market conditions carefully when making decisions about development commitments.

Her comments came as the number of unsold shared ownership homes increased by two per cent to 7,031, the highest level in 10 years. Unsold market sale properties, meanwhile, increased by seven per cent to 2,073, the highest level recorded since 2014. The report said this was partly due to more homes being built.

Elsewhere, the number of shared ownership homes unsold for more than six months saw an increase of 56 per cent to 2,133. Market sale properties unsold for more than six months reduced by 13 per cent to 554.