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Scottish house builder takes decision to pause entering long-term affordable housing contracts
A Scottish house builder has taken a “strategic decision” to pause entering long-term affordable housing contracts.
Springfield Properties said it had taken the temporary action last year in a trading update for 2022-23.
Scotland’s only stock market-listed house builder said it saw a reduction in revenue for affordable housing over the past year, “as the group took a cautious approach to entering into new long-term affordable housing contracts, which it has maintained since year end”.
However, in June 2023, the Scottish government increased the affordable housing investment benchmark by 16.9%.
Springfield said it expects this to enable housing associations to increase the price of affordable housing contracts and progress building programmes.
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The update stated: “The group took decisive action during the year, which has been maintained post period end, to address the uncertain market conditions.
“As noted, the group temporarily halted entering new large long-term affordable housing contracts and adopted a cautious approach to new site launches in private housing.
“Other actions include reducing land buying activity; pausing recruitment and reducing staffing levels in areas most impacted by the market downturn; and maintaining tight cost control, including identifying synergies across the business.
“As a result of these actions, the group has delivered savings of approximately £3m on an annualised basis.”
Innes Smith, chief executive of Springfield Properties, said: “Against a challenging market backdrop, we delivered our highest annual revenue, reflecting our acquisitions, as well as organic growth in private housing.
“While our margins were impacted by significant build cost inflation, particularly in affordable housing, we took decisive action to address this.”
Alongside the trading update, Springfield published an investor research note, which said: “The group has historically worked on several affordable-only housing developments with its partners, but the current inflationary environment has made this activity more difficult to manage, given the typical fixed priced structure of affordable only contracts.
“The recent increase in the affordable housing investment benchmark announced by the scottish government is encouraging and should ease viability for these projects to return.”
