Landlords’ margins will remain tight for at least the next few years, report finds

Margins remained higher across the East and South East of England compared with London, where costs are higher, and the North, where rents are lower.

The report said inflation is set to reduce over the next 24 months, but landlords’ income is “unlikely to rise in real terms”. Factoring in higher spending on existing stock and regulation, it concluded that the sector’s margins “will remain tight through to the mid-late 2020s”.

Due to labour and material cost inflation, the average cost of a social housing unit rose by over £400 between 2021-22 and 2022-23 from £4,061 to £4,475.

Meanwhile, maintenance of existing stock experienced double digit inflation in the same period, with the average cost of repairs rising to £170.

Planned maintenance management costs rose 23% as surveyors became highly sought after for damp detection and stock condition work.

For 2023-24, the report predicted an average rise of £300 to £500 per social housing unit, pushing the sector median close to £5,000.

The bulk of cost increases related to improvement and maintenance works, the authors said. However, they also accounted for the increased cost of regulation.

The authors found that larger landlords tend to be much more highly geared (44% for those with more than 5,000 homes, compared with 31% for those with fewer than 5,000 homes) owing to their debt-funded development programmes.

The report comes as one London council warned at the end of last year that it has revised its development programme amid “challenging” economic conditions.

Also in December, Inside Housing spoke to a number of sector experts who warned that housing associations that are waiting for gilt rates to fall could find themselves in competition with each other due to reduced investor appetite.