Clarion’s surplus falls for third year running

According to the accounts, Clarion’s turnover also fell in the year, from £829m to £816m, with 82% of that turnover coming from social housing lettings, a similar percentage to the previous year. The association’s operating margin, meanwhile, fell from 37% to 35%.

The accounts also confirmed what Clarion said in the April update – that it missed its house building target for the year, building 1,243 of an intended 1,600 homes.

Mark Hattersley, chief financial officer at Clarion, told Inside Housing this was a result of Clarion’s “cautious” approach to the currently volatile housing market.

He added: “Rather than ramping up our ambition too quickly for open market sales and the associated risks, we took our foot off the pedal a bit and eased that development programme back a bit.”

Housing associations in London have been scaling back from open market sale development this year, amid a sticky housing market arising from the uncertainty around Brexit.

In January, it was revealed L&Q would cut its mammoth surplus 45% to £191m due in part to the difficult market conditions.

Clarion’s results also confirmed another figure from its April update, putting its rental arrears at 4.8% of its total rental income, above its target of 4%.

According to the results, arrears increased by £4m as a result of Clarion moving to a new IT system for rent arrears, known as an Enterprise Resource Planning (ERP) system.

Mr Hattersley explained: “There were some initial teething problems with that system. It’s a new system built off Microsoft Dynamics. It was a process issue, a processing systems issue.

“Our collections process wasn’t as good or efficient as we’d hoped in terms of processing data and access to data. That meant we got behind the collections. As you can recognise in terms of our residents, generally, catching up on an arrears position is quite hard.”

He added that Clarion, which currently has around 8,000 tenants receiving Universal Credit, did not believe that the government’s controversial new welfare system has contributed to a rise in arrears, something many in the social housing sector fear will happen as the system is rolled out further.

This calendar year has also seen Clarion step up its programme of selling homes to other housing associations. In March, it sold 306 homes in Preston to Community Gateway Association and last month it sold 154 homes in Stafford to Stafford and Rural Homes.

This is linked to its plan to sell 10,000 homes in 10 years as part of a stock rationalisation programme originally revealed by Inside Housing in 2017.

Mr Hattersley told Inside Housing that plan is still in place, adding: “They were two fairly small initial schemes, very much piloting the approach, that engagement, that process. But yes, we do intend to do more.”

Amid its investment in existing homes, Clarion also reported its in-house repairs service, Clarion Response, has expanded its coverage to 90,000 homes. There is a customer satisfaction rating of 90% with the new service, three years on from a repairs crisis at the legacy organisation Circle.

The group’s charitable foundation Clarion Futures helped over 4,000 residents to find a job in 2018/19, with 81% supported to sustain their employment for at least six months.