In May, the Regulator of Social Housing (the Regulator), published its ‘Value for money metrics and reporting 2020’. This sets out the position across the sector in relation to several Value for Money metrics including trends over the last three years. This report also allows organisations, their boards and other stakeholders to measure their performance and provides comparisons across the sector.
Reassuringly, the operating performance of the sector has remained robust despite the political and economic challenges over recent years. These challenges include the ongoing impact of the 1% rent reduction regime as well as increased investment to tackle the building and fire safety crisis.
Reinvestment in existing stock is now at its highest level since 2018 despite a fall in operating surpluses. In cash terms, reinvestment stood at £12.2 billion in 2020, up from £9.6 billion in 2019. Increasing building safety and health and safety compliance costs meant that more than half of organisations in the sector reported an increase in their repairs and maintenance spends of more than 5%. Over the past three years, capitalised major repairs, total repairs and maintenance costs increased by 15% to £5.7 billion.
However, investment in new supply has also increased over the same period. The Value for Money metric, calculated by dividing the number of social homes delivered in the year by the total number of social units owned, rose slightly to a weighted average of 1.8%, compared to 1.6% in 2019. The Regulator did report some disparities in performance based on organisations’ size, geographic location and whether organisations operated in the care and support sector where margins can be tight.
Furthermore, the Regulator also discussed the slowdown in the market sales sector that some areas of the country have felt, which has led to an increase in borrowing for some organisations to fund development programmes. Over the past year gross debt increased by 8% to £83.1 billion compared to £76.9 billion in 2019. Interest cover has also fallen but the overall financial capacity in the sector remains strong.
Once again, the report, and the Regulator’s commentary, highlights the challenges that the sector faces and the tough decisions housing association boards are dealing with (see our previous article exploring this topic here). Fiona MacGregor, Chief Executive of the Regulator, comments that the “growing range of competing pressures” will mean that organisations will be “forced to make difficult choices” where the “importance of focusing on value for money has never been more important”. Boards must “maintain a clear focus on delivering value for money as an integral part of running their businesses” to ensure effective delivery of services.
The Regulator also released an updated Value for Money metrics - technical note which sets out the definition of each of the Value for Money metrics and how providers should calculate them. The Regulator confirmed that the seven existing metrics remain the most appropriate set of measures to capture performance across the sector.
The Regulator has acknowledged that the metrics may not suit all organisations, but that they work for most. It has, therefore, said that, in the minority of cases, where an organisation is having difficulties reporting on a particular basis, this should be clarified within the commentary accompanying the publication of their data. There is also a separate annex to assist small providers (those owning or managing fewer than 1,000 units).