About this report
This report provides an overview of the aggregated, Audited Financial Statements (“AFS”) returns for the year to 31 March 2025 submitted to us by Registered Social Landlords (“RSLs”).
Throughout the period covered by the AFS returns, the operating environment for RSLs remained notably challenging. The broader macroeconomic conditions continued to exert pressure on tenant finances, RSL expenditure and overall financial performance. In 2024/25, the sector was influenced by a number of key factors, including:
- UK Consumer Prices Index (“CPI”) inflation eased throughout 2024 - falling from 3.2% in March to a low of 1.7% in September - before nudging back up to 2.5% by December and settling near the Bank of England’s target, reaching 2.6% by March 2025. RSL rent increases applied in April 2024 were therefore set against moderating but uneven price pressures.
- After holding at a 5.25% peak, the Bank of England began cutting rates in 2024 - down to 5.00% in August, 4.75% in November, and 4.50% by February 2025. While easing helped reduce borrowing costs, RSLs still felt the strain from the earlier high‑rate period.
- Construction and maintenance costs remained stubbornly high. Material inflation eased, but labour shortages and rising wages continued to push up project costs. Meanwhile, safety, quality and energy‑efficiency requirements added further pressure on RSL budgets.
- Contractor fragility remained a major risk, with Scotland seeing ongoing construction sector failures - including 18 insolvencies in March 2024 - disrupting maintenance and development programmes as firms faced financial distress or collapsed.
- The Scottish Government reversed its earlier cut to the Affordable Housing Supply Programme, restoring funding from £555.9 million back to £768 million in the December 2024 Budget, effectively reinstating the near £200 million reduction.
Highlights
Overall, most RSLs remain financially resilient, though continued reductions in cash reserves highlight the pressure of sustained investment and operating demands. Most financial indicators for RSLs strengthened in 2024/25, and liquidity improved with new lenders and increased commitments from existing funders. Yet performance across RSLs is uneven. For some RSLs, weaker operating results and heavy investment demands are already straining cash and short‑term liquidity.
The overall financial position of RSLs improved in 2024/25, as income grew more quickly than costs:
- turnover increased by 9.7% to £2.31 billion, driven mainly by a 10.0% rise in affordable lettings income;
- affordable letting income reached £2.04 billion and continued to account for the majority (88.5%) of aggregate revenue;
- this includes gross rent receivable and service charges of £1.78 billion (2024 £1.66 billion), a rise of 7.2%;
- operating costs rose by 4.8% to £1.84 billion, with both planned and reactive maintenance spending increasing, albeit at different rates.
These trends contributed to an aggregate operating surplus of £498.2 million, an increase of 36.7% after exceptional items, supported by a notable uplift in deferred grant released of £241.8 million. Affordable lettings surplus also grew strongly, rising by 31.8% to £453.0 million
Aggregate EBITDA MRI interest cover rose to 237% in 2024/25, up from 199% the previous year, marking a strong recovery from its historic low. This improvement is attributable in part to the increased operating surplus. An interest cover ratio above 100% indicates that net earnings - after accounting for expenditure on maintaining existing stock, whether capitalised or expensed - were more than sufficient to meet the year’s debt‑servicing obligations. On an EBITDA‑only basis, interest cover rose to 358% (2024 321%), and as this metric becomes a more widely used covenant, it helps reduce the risk of breaches linked to year‑on‑year fluctuations in investment activity.
RSLs continued to invest in their homes, contributing to a 3.1% rise in net housing assets to £17.04 billion. Planned maintenance expenditure rose by 3.4% to £182.0 million and reactive maintenance expenditure increasing by 6.4% to £314.3 million.
Aggregate cash balances declined for the fourth consecutive year, falling by 3.3% to £662.3 million. However, cash generated from operating activities increased by 19.4% to £735.0 million, indicating improved operational cashflow despite ongoing investment commitments.
In total, RSLs spent £1,004.1 million (2024 £945.1 million) on management and maintenance, the highest on record. Total management and maintenance cost per unit increased by 5.8% to £3,138 (2024 £2,965).
The number of RSL employees in defined benefit pension schemes continued to reduce, but many RSLs are liable for deficits arising from preserved benefits. Those in the SHAPS schemes will have pension deficit repayments beginning in April 2026.
Key indicators of rent and letting performance improved across 2024/25:
- voids reduced to 1.4% (2024 1.5%) but remained above pre-pandemic level of 1.2%;
- bad debts fell to 0.6% (2024 0.7%);
- net arrears reduced to 2.4% (2024 2.6%), the lowest rate since 2014/15; and
- average rent increases were above both the Consumer Price Index (“CPI”) and UK Retail Prices Index (“RPI”), following three years in which they remained below both measures.
Looking ahead
RSLs continued to operate in a challenging and uncertain economic climate throughout 2025/26. In February 2026, the Bank of England held the Bank Rate at 3.75%, noting that although inflation is easing, it remains above the 2% target. The Monetary Policy Committee (“MPC”) indicated that further rate cuts are possible following 150 basis points of reductions since August 2024 but stressed that future moves will be “a closer call”. This position was set before the latest conflict in the Middle East, which has added new economic risks.
Inflation has fallen significantly from the highs of 2022–23. CPI rose by 3.0% in the year to January 2026, down from 3.4% in December, and CPI with Housing costs (“CPIH”) slowed to 3.2%. Despite this progress, inflation remains above target, and services and labour costs continue to affect RSLs. The Middle East conflict is also expected to push UK inflation higher in 2026 through energy and supply‑chain impacts.
In 2025/26, many RSLs applied inflation‑linked rent uplifts to maintain essential investment in tenant safety, stock quality and decarbonisation. At the same time, with the future of the Scottish Social Housing Net Zero Standard still uncertain, it remains vital that RSLs hold comprehensive, high‑quality and up‑to‑date data on the construction, components and condition of every home. This information is the foundation of effective investment and asset management planning and will be critical for meeting whatever requirements the final Standard brings.
Supply‑chain volatility, rising construction & materials costs and ongoing labour shortages have continued into 2025/26, prompting many RSLs to scale back or re‑profile their new‑build development plans. At the same time, unanticipated building safety costs - including the assessment and remediation of cladding - have added further financial pressure, heightening the risk to RSLs’ stability at a time when budgets and investment capacity are already constrained.
Against this challenging backdrop, the Scottish Government’s Housing Emergency Action Plan, announced on 3 September 2025, introduced a significant commitment to invest up to £4.9 billion over the next four years to expand the supply of affordable homes. This investment, aimed at delivering around 36,000 affordable homes by 2030, is a central element of the Government’s wider response to Scotland’s housing emergency. Our Summary of Registered Social Landlord Financial Projections 2025/26 - 2029/30 published in December 2025, outlines the anticipated financial trajectory for RSLs and highlights the importance of prudent financial planning.
In December 2025, we published the final versions of the Determination of Accounting Requirements and accompanying guidance Financial Viability of RSLs guidance. These changes will not apply to the 2025/26 accounts or the associated AFS returns.
