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London housing association surpluses continue to slip amid market slowdown
London housing associations have continued to see their surpluses fall in the first half of this financial year as costs rise and income from sales falls.
L&Q, which owns 105,000 homes and is the sector’s biggest builder, issued a trading update for the six months up to 30 September on Friday, revising down its surplus forecast for 2019/20 by £50m from between £250m and £270m as predicted in May to between £200m and £220m.
Its turnover for the period was £383m, down from £418m last year, while its operating surplus fell to £130m from £157m.
There are now 545 unsold homes on L&Q’s books, including those built through joint ventures, with sales income falling from £122m to £76m.
Meanwhile, its costs rose from £177m to £216m, with spending on maintenance increasing by £22m.
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Waqar Ahmed, group director of finance at L&Q, said: “The whole housing association sector is facing one of the most challenging environments in recent history.
“The cost of additional building safety measures, coupled with the downturn in the housing market caused by political and economic uncertainty, is having a major impact on the sector’s finances.
“L&Q faces these challenges from a position of financial strength, but we are also implementing prudent measures that will protect our financial strength and enable us to focus on our immediate priorities.”
Last month, Inside Housing revealed that L&Q has paused new development projects amid a downturn in the housing market.
Fellow London landlord A2Dominion, which owns around 38,000 homes, also posted a six-month trading update on Friday revealing that its surplus for the first six months of 2018/19 was £20.3m, down from £31.1m last year.
Its income from sales fell 45% over the period, from £73.9m last year to £40.5m.
Interest costs also rose from £23.5m to £29.1m, with A2Dominion calling this “a result of a lower level of interest being capitalised against development projects, as a consequence of taking a more conservative approach, capitalising interest at start on site as opposed to at scheme purchase”.
Clarion, the UK’s largest housing association with 125,000 homes, said in a trading update last week that its surplus for the first six months of 2019/20 was £139m, down from £154m in 2018/19.
It said the fall was down to “our increased focus on customer services along with careful management of our development sales programme”.
However, the association invested £272.4m in new homes over the period, up from £218.1m in the first six months of last year.
L&Q and A2Dominion both saw their surpluses fall sharply in 2018/19, while Clarion also recorded a slight drop.
Several of the capital’s housing associations have revealed plans to reduce or alter their development plans in response to difficult market conditions.
Update: at 13.00pm, 04/11/19 the article was updated to reflect that A2Dominion owns around 38,000 homes, not 31,000 as previously stated.
