About this Report
This report provides an overview of the aggregated, Audited Financial Statements (AFS) returns for the year to 31 March 2022 submitted to us by Registered Social Landlords (RSLs).
The level of economic volatility and uncertainty facing RSLs and their tenants over the reporting period was unprecedented and several key factors continued to impact RSL performance during 2021/22, including:
- Ongoing work to catch up on maintenance and development deferred due to the COVID-19 pandemic restrictions;
- The impact of Brexit and Russia’s invasion of Ukraine.
In general, RSLs withstood difficult economic and operating conditions in 2021/22. Their robust financial performance and strong liquidity means they remain in a relatively strong position to respond to the financial challenges ahead, although those challenges are significant.
At an aggregate level in 2021/22, RSLs:
- turnover increased by 5.05% to £1.90 billion;
- affordable lettings turnover rose by 3.07% to £1.64 billion, contributing 86.27% of total turnover. This includes gross rent receivable & service charges of £1.47 billion, a rise of 2.70%;
- operating costs increased by 9.06% to £1.55 billion, well above both inflation and average rent increases during the period;
- planned and reactive maintenance costs rose significantly, rising by 17.63% and 22.94%;
- operating surplus after exceptional items dropped marginally by 2.54% to £380.57 million;
- affordable lettings surplus was lower than the prior year as RSLs began to catch up on maintenance and development delayed by the COVID-19 pandemic;
- despite challenges from the pandemic, RSLs continued investing in new and existing homes, with net housing assets up by £860.23 million to £14.92 billion by 31 March 2022;
- cash balances decreased by £98.40 million to £892.22 million;
- cash generation from operating activities was down from £626.61 million in 2021/22 to £603.38 million;
- interest Cover increases in operating margins caused a 23-percentage point reduction in EBITDA MRI interest cover, which was down to 261.39% for 2021/22;
- voids, arrears and bad debts at 31 March 2022 either remained around the previous year’s levels or showed some improvement, demonstrating the positive impact of the work done by RSLs to mitigate these;
- in aggregate, the average rent increase for RSLs rose well below both CPI and RPI. More detailed information can be found in our recent Rent Increases Thematic published in September 2022;
- the number of employees in defined benefit schemes continued to reduce.
Since 31 March 2022 the complex and uncertain economic environment that RSLs operate in has worsened. Inflation rose to more than 11% in October 2022 and while it has started to fall, it remains high with food and energy prices continuing to put pressure on household incomes. The Bank of England base rate is currently 4%, having risen from a record low of 0.1%. Supply chain disruption and labour scarcity has added to the volatility. And while the Scottish Government has not capped rents beyond 31 March 2023 for the social rented sector, many RSLs have committed to an average rent increase no more than 6.1%.
It is in that context, that RSLs are looking to deliver on investment in their existing stock, building safety and, decarbonisation and stock quality commitments as well as continuing to invest in building new homes. Information on RSL projections can be found in Summary of RSL Financial Projections: 2022/23 - 2026/27 published in December 2022. We expect RSLs will require to adjust their business plans as appropriate to ensure they continue to manage their resources to ensure their financial well-being, while maintaining rents at a level that tenants can afford to pay.