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Large North East landlord looks to launch for-profit provider
Karbon Homes is aiming to launch its own for-profit provider as it said developing social housing “remains difficult”.
The 34,000-home landlord said it will start the regulator’s registration process for the new entity “soon”.
Karbon said having the vehicle would allow it to “attract external investment and deliver more much-needed social housing across the North East and Yorkshire”.
The Newcastle-based group will be following in the footsteps of G15 landlord Hyde, which in 2022 became the first traditional housing association to set up a for-profit. Hyde later went on to sell a 50% stake in its Halesworth for-profit to French insurance giant AXA.
Among the benefits of a for-profit is that it is allowed to pay dividends to shareholders, which means it is able to attract a wider range of investors than a traditional housing association.
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Karbon’s move was revealed in a filing for its half-year results yesterday.
The group said it welcomed the government’s moves to tackle planning delays, increase grant funding and a proposal for a five-year rent settlement at the Consumer Price Index + 1%.
“These are welcome announcements which will have a positive impact on our financial plans. However, development of new social housing in the current climate remains difficult,” Karbon said. This led the group to explore the “possibility” of launching a for-profit, it said.
In its filing, the group reported it had “added” 255 homes since September 2023. “Progress is slightly behind target this year, reducing capital expenditure, but also reducing income from completed homes,” it said.
In its last full year to the end of March 2024, Karbon completed 644 homes.
Karbon reported a pre-tax surplus of £16.9m in the six months to the end of September, which was £5m lower than in the same period last year. It came despite turnover increasing by £10m to £108m.
The landlord also pointed to the continuing financial challenge of repairs. “The cost of repairs has risen significantly from pre-pandemic levels and has not abated despite reducing the backlog,” the filing said.
“This has come from a mixture of cost inflation (labour and materials), customer demand, and, rightly, promotion of customers’ rights meaning an increase in damp and mould and fire safety remediation works.”
Karbon reported it spent £16.6m on responsive repairs, up from £13.6m in the same period last year.
On an operating basis, including asset sales, the group’s surplus edged up to £27.2m. Its overall operating margin, including asset sales, was broadly flat at 26.4%.
Scott Martin, executive director of resources at Karbon, said the half-year numbers highlighted “continued positive performance through what has been a challenging operational and economic environment”.
Earlier this year, the group also grew its portfolio by taking on 759-home Leazes Homes as a subsidiary.
Karbon currently has a G1/V1 rating with the regulator.
