The Week in Housing: bucking the trend on development

Good afternoon.

As would-be homeowners grapple with high interest rates and affordability, the boss of one large recently merged landlord suggested this week that the government should look at alternatives to shared ownership, such as Rent to Buy.

Rent to Buy has been touted as a model that could replace shared ownership as the dominant affordable homeownership tenure.

However, Fiona Fletcher-Smith, chief executive of L&Q, told MPs on the Levelling Up, Housing and Communities Committee in June that Rent to Buy is still “moving through the system”.

Despite being offered by several large housing associations, it remains a niche option.

In a longer interview with Inside Housing, Mark Washer, chief executive of the newly merged Sovereign Network Group, also outlined why the landlord is increasing its development targets in challenging economic conditions.

The impact of those headwinds on the sector was revealed by the Regulator of Social Housing (RSH) in its latest report on the financial overview of private registered providers for the year up to 31 March 2023.

The operating surplus generated by the sector fell by 9% to ￡4bn, with an aggregate operating margin of 16.6% – the lowest reported since 2009.

Overall, the sector continues to have strong liquidity and continues to attract private investment. Including refinancing, the sector agreed new facilities of ￡9.9bn in the year, increasing total available undrawn facilities to ￡30.3bn.

However, weaker performance and high levels of investment are affecting the level of cash and short-term investments held by the sector, which decreased from ￡7.9bn to ￡6.3bn in March 2023.

Regardless, the English regulator believes this shows that providers remain committed to future investment, with record spend on existing homes forecast again for the next year.

However, Inside Housing reported how landlords that are waiting for gilt rates to fall could find themselves in competition with each other due to reduced investor appetite.

As the economic uncertainty continues to test the sector’s financial resilience, the head of a major house builder warned that the sector?cannot continue with the cross-subsidy model “at these levels” without an increase in grant funding from the government.

It appears that many associations believe the path to greater resilience is to merge. Continuing the trend in this activity of late, Stonewater announced that its acquisition of Surrey-based landlord Mount Green is set to go ahead early next year.

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