Special report: total development income hits £3.8bn

Individual performances: income above £4m

Associations were ranked by their total development-related income, with the top 10 all operating within London and/or the South of England.

Peabody had the highest level of development income with £313m, which was up 113 per cent. This was made up of £200m in non-social housing sales and £113m in first tranche sales. With a total turnover of £1.1bn, development activity made up just under a third of this. That compared with 22 per cent for the 2021-22 period.

The group also had one of the largest total surpluses from first tranche and open market sales at £32m, including £21m for open market sales, with an open market sales margin of 10.5 per cent. 

A spokesperson for the group says the increase was a result of its merger with Catalyst over the period. They add: “When we sell a home on the open market or as shared ownership, we immediately reinvest the money, or it helps to provide a rent subsidy elsewhere. That year, we reinvested £257m in maintaining and improving homes, supporting communities, and in subsidising new social and affordable homes. It was this cross-subsidy that enabled us to provide more new social homes than any other landlord.

“We are a not-for-profit organisation that has been reinvesting our income for more than 160 years and we’re continuing to invest substantially for the benefit of residents in 2024. In the six months leading to September 2023, we spent £184m on maintaining and improving residents’ homes, and we plan to spend around £2bn more on this over the next five years.”

L&Q followed with £302m in development income, which was up 15 per cent. An increase in first tranche sales drove this, with income here hitting £146m after it saw a 25 per cent rise. Open market sales totalled £156m, following a smaller (but still significant) increase of 7.6 per cent.

With £28m, the group had the third-largest total surplus from sales. This was again driven by first tranche sales, which reached £24m (compared with a £4m surplus for open market sales). Margin improved across the board for the association. Its first tranche sales margin was 16 per cent (compared with -2.6 per cent in 2021-22), while its open sales margin was 2.6 per cent (compared with -15 per cent in 2021-22).

John Lumley, strategic sales director at L&Q, says: “Shared ownership made up a significant proportion of our development pipeline and continues to do so. And it is a product which is still performing really well.

“So, the figures from that financial year bear that out and that’s a trend that we’re continuing to see, particularly with what we’ve experienced recently in terms of interest rates, affordability, cost of living and so on because of the flexibility of that product and ability to adjust first tranche percentages. Also, the rental element is really attractive to buyers in the current market so it performed well in that financial year. It’s built into our forecast for the next financial year as well.”

Mr Jubb echoes this sentiment more generally across the sector. He says: “Shared ownership’s competing scheme of Help to Buy is no more. That was an immensely detrimental thing to shared ownership, but now its main competitor has been withdrawn. So shared ownership popularity has increased, notably on the back of rents being sky high and a weaker sales market with significantly higher interest rates being the only way people can access homeownership at the moment.”

Clarion followed with £219.6m in development income, but in contrast this was down on the previous period by nearly a third. The association was one of only two in the top 10 list that saw a decrease in sales income.

Out of the £219.6m, £121m related to first tranche sales (down nearly 20 per cent) and £98.6m in open market sales (down by 37 per cent). Its total turnover decreased by 4.8 per cent to £1bn, while its development activity as a share of turnover was down to 22 per cent from 29 per cent in the previous period.

Sage had a total development income of £197m after seeing a 24 per cent increase. This related solely to first tranche sales (1,482 in total). Surplus totalled £48.8m, with a margin of 24.7 per cent compared with 20.7 per cent the year before.

A spokesperson for the organisation says: “We are proud to have delivered over 15,500 affordable homes since our inception six years ago, with a further 6,000 under development, making us England’s largest provider of affordable new homes for three successive years. Delivering shared ownership properties is a key focus and the increase in sales is proof of our ongoing commitment to helping as many people as possible own their own homes.”

The group has a strategy to deliver an approximate 60/40 split of affordable or social rent to shared ownership homes, with a target to deliver 30,000 homes by 2030.

Notable increases in development income included The Guinness Partnership, which came sixth in the top 10. The organisation had a total development income of £157.9m, which was up 421 per cent.

This was made up of £126.3m in open market sales income, with the remaining coming from first tranche sales. In its accounts, the group said this represented “a significant year-on-year increase and reflects the bulk sale of 204 homes in one block at Leaside Lock (London) to a private rental investor. This has reduced exposure to future sales risk and increased the share of income generated from outright sales to 23 per cent (2022: 0.1 per cent). We expect the volume of outright sales to fall in 2023-24.”

A spokesperson for the organisation says that the Leaside Lock development was built to generate cross-subsidy for its affordable housing. “We decided on the bulk sale of one block to a single investor in order to manage sales risk in a challenging property market.”

Discussing the market at the time, they add: “The first six months of 2022-23 saw prices remaining steady or showing gains in some areas. Levels of demand were healthy, and the general market sentiment was positive. This is in stark contrast to the second half of the year following the Mini Budget when interest rates started rising rapidly.

“Many lending products were withdrawn at short notice and the market effectively froze for a period, with the Christmas slowdown starting prematurely and the New Year bounce dampened. The majority of our outright sales completed before the end of Help to Buy support, which had protected our exposure. Although we saw some slowdown and pressure on affordability, our shared ownership sales proved reasonably [strong].”

Your Housing Group saw a 287 per cent increase in development income to £25m. This was largely made up of first tranche sales (£24.6m), although both first tranche and open market sales had seen rises of 290.8 per cent and 165.6 per cent respectively.

Lorraine Donnelly, the group’s development director, says the group’s strategic partnership with Homes England has “enabled us to deliver an affordable housing programme [that] also includes shared ownership”.

She adds: “[This] supports those wanting to get onto the housing ladder at a time when it’s difficult to do so due to increasing mortgage costs and the cost of living crisis. There is high demand and we have worked to provide the right product to meet that demand, not just in the homes we build, but in the communities that we create.”

Beyond Housing, meanwhile, saw a 565 per cent increase in development income to £11.9m, which was largely made from open market sales. Clare Harrigan, the group’s director of development, says that this related to the third and final phase of a particular development.

“We’d brought forward some of the affordable plots to meet grant deadlines,” she says. “At that time, the housing sector was impacted by the one per cent rent cuts and most housing associations at that time had to stop, pause and relook at their capital investment programmes, whether it was developmental or planned works. And that was the same for us. So, this was a scheme that got paused at that time and we took some time out before we started on phase three, which is the scheme that accounts for the sales income in 2022-23.”

The group’s first tranche sales were down 46 per cent to just under £1m but despite this, Ms Harrigan says that the market had been “buoyant”. Ms Harrigan adds: “We used to model on an assumption of [buyers taking an initial] 35 per cent [first tranche share] but that average has actually increased to 40 per cent.”

Mr Jubb says that this is now common among his other clients, too, with some buyers unable to buy on the open market following the withdrawal of the Help to Buy. “The majority of our clients report their average first tranche sale at around 40 per cent. That has been consistent for quite a while, so I don’t see that changing. It highlights the fact that the reform of shared ownership [which enabled buyers to buy a first tranche share as low as 10 per cent] was a waste of time in my opinion.”

In contrast, Notting Hill Genesis saw a near 60 per cent decrease in development income to £102.7m. This was made up of £64m in open market sales, which was down 65 per cent, and £38.4m in first tranche sales (down 46 per cent).

On this, a spokesperson says the decrease had been impacted by “the small volume of homes available for private sale at this time, which they say ordinarily would “significantly improve” revenue for not-for-profit housing providers.

The spokesperson adds: “Other contributing factors included buyer hesitancy due to rising interest rates, cost of living increases and economic uncertainty created by the 2022 Mini Budget. The current financial year continues to be influenced by economic uncertainties, the impact of which is being felt across our sector.

“As reported in our half-year trading statement, we sold 41 homes during the six months ended 30 September 2023, in line with the new build sales programme, which is budgeted to be much lower in 2023-24 overall and is weighted towards the second half.”

Top 30: non-social housing and first tranche margin

Raven Housing made the largest margin on its open market sales at 37.8 per cent, which was up considerably on the previous year when it was 10.3 per cent. Accent Group followed with a margin of 33.4 per cent and then Your Housing Group with 27 per cent.

Southern Housing (£66.7m), Vivid (£62.4m) and LiveWest (£56.7m) had the largest incomes within this list, with margins of 18.1 per cent, 11.5 per cent and 16.7 per cent respectively.

The top 30 first tranche margins were topped by Broadacres Housing Association with 48.8 per cent. This was on an income of £3.6m and a surplus of £1.8m.

Beyond Housing followed with a margin of 39 per cent, then Flagship Housing Group with 38 per cent and CHP with 35.6 per cent. Sage Housing had the largest income in this group with £197.2m and a surplus of £48.8m. Its margin was 25 per cent.

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