Providers continued to invest significantly in existing homes to tackle issues like damp and mould, building safety and improving energy efficiency. Providers made record investment in repairs and maintenance, spending £7.7bn over the year (20% more than in 2022).
Providers also continued to build much-needed new social homes for the future. Investment in new supply increased by 11% to reach £13.7bn. The number of new social homes built in the year increased to 53,000 (7% higher than last year).
Providers faced significant economic challenges, including higher inflation and borrowing costs. This led to the sector being stretched and providers’ financial resilience being tested. These trends have continued into the current financial year.
As a result of higher investment spend and challenging conditions in the wider economy, providers’ interest cover continued to fall. Aggregate interest cover (excluding all sales) stood at 103%, the lowest since 2010. Interest cover has continued to fall in the current financial year.
RSH has assurance that the sector remains robust, but individual providers have less financial headroom and their capacity to absorb downside risk is reduced. This is reflected in RSH’s judgements, with the majority of providers now graded at V2 for financial viability.
Overall the sector continues to have strong liquidity and continued to attract private investment. Including refinancing, the sector agreed new facilities of £9.9 billion in the year, increasing total available undrawn facilities to £30.3bn. Providers remain committed to future investment, with record spend on existing homes forecast again for the next year.
Will Perry, Director of Strategy at RSH, said:
“Social housing providers are grappling with a range of major external economic pressures. At the same time, they are spending record amounts on improving their tenants’ homes and fixing problems like damp and mould.
“Boards must remain clear-sighted about financial risks, and deploy appropriate mitigations, while building more and better social homes for people who need them.”