Regulator of Social Housing warns providers on financial viability amid challenging economic backdrop
Boards of social housing providers and councillors whose authorities are responsible for local authority homes need to have a clear sense of their priorities and make trade-offs with providers facing substantial financial pressures, the Regulator of Social Housing (RSH) has warned.
The warning came as the RSH published its Sector Risk Profile for 2022, which pointed to “a very challenging and fast-moving economic backdrop”.
The Regulator said: “High inflation is impacting on operating costs and the cost of debt is rising at the same time as increased cost of living pressures on tenants, a proposed rent cap, and a weakening housing market.
“To maintain financial resilience, providers need to continue responding appropriately to the changing conditions. Boards and councillors will need to have a clear sense of their priorities and make trade-offs. They must ensure that their mitigating actions are strategic and timely, underpinned by stress testing and robust planning, and communicated effectively to stakeholders.”
The RSH said that alongside their financial viability, tenant safety and the delivery of landlord services were key responsibilities which boards must continue to prioritise.
It noted that providers are planning significant investment in existing homes to meet quality, building safety, and decarbonisation commitments, but said that this "must be underpinned by robust data on stock condition, a clear understanding of policy changes in these areas, and properly engaging with and listening to tenants".
The RSH said boards would also need to recognise that delaying investment in existing stock could increase cost pressures over the long term and damage the sector’s reputation.
“Demand for new homes remains high even as the economics of development become more uncertain,” it added. “Providers will need to consider carefully how to assess new development, ensuring that risks are tightly managed, including investment in market-sale homes which could affect providers’ core social housing business.”
Fiona MacGregor, Chief Executive at RSH, said: “Providers must take a strategic approach to managing the significant risks we have identified in our Sector Risk Profile and act appropriately to maintain their continued financial viability. Boards and councillors are the custodians of people’s homes, and it’s absolutely vital that tenants’ homes, safety and the delivery of essential landlord services are not put at risk.”
