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Shared ownership sales to for-profits boost operating margin at Essex housing association
An Essex housing association improved its operating margin by eight percentage points to 33.8% in 2023-24, after selling shared ownership homes to a for-profit partner.
Chelmsford-based CHP’s operating surplus totalled £25.9m, an increase of £5.9m year on year, it said in its annual report for the year to 31 March 2024.
CHP said this was down to “sales of shared ownership equity to for-profit partners”; predominantly 168 shared ownership homes that were sold to M&G.
Inside Housing revealed that M&G had struck the deal with CHP last year.
The 11,700-home landlord has been working in partnership with M&G, Octopus and L&G Affordable Homes (LGAH) to help it deliver new affordable homes across Essex.
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This strategy left CHP with a surplus before tax of £7.4m in 2023-24, up from £2.5m the previous financial year, and an improved EBITDA MRI (earnings before interest, tax, depreciation and amortisation, major repairs included) figure of 111.4%, compared with 104.2% in 2022-23.
The upwards trajectory for this measure bucks the sector trend, which has seen London landlords in particular struggle to keep above 100%.
Turnover dropped by £1m at CHP, which it said was down to a “significant drop in first tranche shared ownership sales as fewer homes were built”.
The landlord delivered 252 new homes in the last year, of which 201 were built by CHP and 51 by LGAH.
CHP said it would “likely fall short” of its target of building 150 homes for social rent over three years, having built 16 in total over two years.
“We hope to provide more homes for social rent, and we will review our growth strategy next year to help us do this,” CHP said, adding that the volume of properties would be dependent on Homes England funding.
The association’s repairs and maintenance spend stayed broadly the same at £17.3m. It repaired 609 empty homes, 21 fewer than last year. But it spent just under £2,000 more on each property, with the average at £4,827.
In October last year, credit rating agency S&P upgraded CHP’s outlook to ‘stable’ from ‘negative’ due the disposal of shared ownership assets.
Neil Perrins, chief financial officer at CHP, said: “As in other sectors of the economy, the social housing industry faced significant pressures caused by the ongoing cost of living crisis with high inflation and interest rates.
“Despite these pressures, our financial performance was strong with an improved surplus and metrics alongside low rent arrears allowing us to invest in our existing properties while continuing to develop the homes so desperately required by our communities.”
Paul Edwards, chief executive at CHP, added: “The cost of living crisis means that this year has been another difficult one for many of our customers.
“These strong financial results show that we are making good progress with our plans and will continue to do our best for customers each day.”
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