You are viewing 1 of your 1 free articles
RSH quarterly survey: interest cover decreases again due to repairs and maintenance spend
Interest cover has reduced for the second quarter in a row due to significant spending on repairs and maintenance, according to the English regulator.
The Regulator of Social Housing’s (RSH) latest quarterly survey of the sector’s financial health shows that providers are continuing to make record investment in new and existing homes, with damp and mould a priority.
On repairs and maintenance, total revenue spend reached £1.2bn between July and September, which was 5% higher than forecast.
At the same time, the RSH said that landlords are grappling with significant external economic pressures that include higher inflation and borrowing costs, as well as ongoing supply chain issues.
READ MORE
Consequently, annual interest cover decreased again. Excluding all sales, rolling 12-month cash interest cover was 74%, compared to 78% in the previous quarter, which was then the lowest level on record.
Providers forecast that interest cover will increase slightly to 76% over the next year. Despite this pressure, the RSH said it “continues to have assurance that the vast majority of PRPs are managing their lender interest cover positions”.
The latest report is based on the regulatory returns of 204 registered providers that own or manage more than 1,000 homes.
Despite the challenges, there was spending of £3.7bn on new development in the quarter. This was higher than the previous quarter but 18% below forecast.
Landlords put this down to operational delivery issues, as well as contractor insolvencies.
The sector’s total agreed borrowing facilities increased by £1.4bn in the quarter, reaching a total of £125.3bn.
The latest survey estimates that providers will draw a further £2.2bn in debt over the next year from facilities that have not yet been agreed, which will be affected by higher interest rates.
The RSH said that boards will need to consider the timing of future investment spend, as delays could leave providers exposed to higher interest costs on new or refinanced facilities.
Will Perry, director of strategy at the RSH, said: “Social housing providers continue to operate in a very challenging economic climate, and they need to maintain a strong focus on risks and deploy mitigations when needed.
“Providers must be prepared for further increases in interest payments and operating costs, particularly if they currently have high levels of cheap, fixed-rate debt. Boards will want to make sure they don’t delay investment in new and existing homes while they manage their cash and covenant positions carefully.”
This latest update on the sector’s financial health comes just over a week after the RSH warned that one of the significant pressures facing the sector is a declining housing market that threatens to dampen income from development sales.
Sign up for our regulation and legal newsletter
Already have an account? Click here to manage your newsletters
