In its annual review of housing provider value for money indicators, housing data specialist Housemark also found the social housing cost per unit is expected to reach beyond £5,000 by 2023/24 and that the sector’s margins will remain tight through to the mid-to-late 2020s.
The cost of repairs is also on the rise. For existing stock, each maintenance activity experienced double-digit inflation in 2022/23: 16% for planned works and 17% for responsive repairs, with the average cost of a repair rising to £170.
As well as labour and materials challenges on the front-line, planned maintenance management costs rose 23% as surveyors became highly sought after for damp detection and stock condition work.
In compiling its report (raw link in notes), Housemark gathered value for money metrics from the annual accounts of 181 English housing providers. Its findings allow landlords to benchmark their performance and come ahead of value for money figures due to be published by the Regulator of Social Housing early in 2024.
Some other key findings from Housemark’s analysis include:
- Operating margins are higher in East and South East compared to London, where costs are higher, and the North of England where lower rents reduce landlord surpluses
- Although the headline gearing rate has remained relatively flat in recent years, this masks considerable variation across landlords of different sizes, types and locations
- Larger landlords tend to be much more highly geared (44% for over 5,000 units, compared to 31% for under 5,000 units) as their business models are more likely to include significant debt-funded development programmes
- This approach to increasing new supply is more evident among landlords based in the South and Midlands than those based in the North (for example South East 45%, Yorkshire & Humberside 34%)
- With new housing supply rates stalling at around 1.3% of stock, the rise in reinvestment rates is being driven by record expenditure on existing stock as social housing providers work on improving quality and energy efficiency
Jonathan Cox, Director of Data and Business Intelligence at Housemark, said: “We found the average social housing cost per property stood at £4,474 and believe this will rise by £300-£500 per unit by 2023/24, which would push the sector median close to £5,000. While the bulk of cost increases relate to improvement and maintenance works, the increased cost of regulation – fees, record-keeping, engagement – creates a workload that was not there five years ago.
“In order to meet the cost of making improvements to stock and services, housing providers are looking at ways to increase value –reviving the ‘three Es’ of economy, efficiency and effectiveness.
“Housemark’s consultancy team has recorded an uptick in supporting landlords with lean system design. Improving services by investing in productivity gains for more output with the same or less input.”
The report also sets out how Housemark is reviewing its cost benchmarking model in line with customer feedback. The changes will provide a clear line of sight from the social housing cost per unit broken down into comparable management and maintenance categories. This will give landlords greater transparency with simpler data entry, while maintaining the detail needed for making value for money judgements.
View the report here.