L&Q predicts significant annual drop-off in starts as it focuses on existing development pipeline

“While we do expect future numbers to be in line with the rest of the sector and therefore lower than the bold performances L&Q has achieved in the past two years, it should also be noted that we have had a few schemes with minor changes in programme timings, which will now start later than anticipated. Hence we expect the rate will pick up again for the rest of the year.”

During the first quarter this year, the landlord completed 701 new homes, which was down 45% on the previous year.

Of those completions, 523 were for social housing and the remaining 178 for market sale.

L&Q said the trading results reflected a focus on its existing stock, which includes a £3bn major-works investment programme to address “our strategic priorities of health and safety, quality of homes and improving services”.

The focus on existing stock comes as Fiona Fletcher-Smith, group chief executive of L&Q, was summoned to a meeting with Michael Gove. The housing secretary had expressed his disappointment in the landlord following a special investigation by the Housing Ombudsman.

In a letter, Mr Gove said: “You have failed your residents.”

His intervention last month came after a report by the ombudsman uncovered a “prolonged period of decline” in the way L&Q manages its repairs and complaint-handling. 

A total of 103 L&Q residents were given £142,000 in compensation – the largest the ombudsman has awarded so far – after the watchdog revealed that the landlord had “consistently failed” to resolve the vital issues it has been facing.

Beyond the refocus on existing homes, the landlord reported a turnover that was broadly the same as the year before, at £242m. Its interest cover ratio fell from 231% to 119%.

Its operating surplus declined from £89m in the first quarter of 2022, to £68m. Surplus after tax fell further, down 75% at £15m.

The landlord’s outlook for the year ending March 2024 stated: “L&Q’s forward guidance is unchanged from our last trading statement, but in recognition of prolonged inflation expectations and higher interest rates we expect EBITDA/interest metrics to be at the lower end of guidance.

“Our projections for surplus after tax are expected to be in the range of £300m to £320m. We expect to deliver circa 3,000 new residential homes of which circa 60% is expected to be for social housing tenures.”

Waqar Ahmed, group finance director, said: “L&Q’s Q1 trading results continue to reflect our stated objectives to divert a greater level of expenditure towards our residents’ existing homes through our £3bn major-works investment programme to address our strategic priorities of health and safety, quality of homes and improving services. 

“In the year to date, we have invested £77m in our maintenance programme, which continues to deliver major internal and external works inclusive of measures to address damp and mould, fire safety, energy efficiency and wide-ranging estate improvements.

“We have completed inspections on 1,031 of the circa 1,800 buildings where this is required by new building safety legislation, begun remediation works on 74 buildings and have replaced, installed or upgraded fire alarm systems benefiting nearly 3,000 homes.”

Mr Ahmed said the landlord still expected to deliver around 1,100 starts and around 3,000 completions by the end of the financial year 2024, despite the downturn in starts and completions.

However, he urged caution, as prolonged cost inflation and increasing mortgage rates are impacting buyer affordability. 

He added: “Reservations for outright sales remain subdued. However, the shared ownership market continues to be resilient despite market headwinds.”