About this report
This report provides an overview of the aggregated financial projections as submitted to us by all Registered Social Landlords (RSLs). The projections cover the five-year period from April 2025 to March 2030.
We collect Five Year Financial Projections (FYFP) annually from all RSLs. The return sets out the financial projections from an RSL’s business plan across a five-year, medium term, period. The projections set out the main financial assumptions applied and incorporate projections for the primary financial statements, along with additional context around, for example, development programmes and decarbonisation plans.
Strategic context and financial environment
A business plan will set out an RSL’s strategic direction and its financial plans and how it will resource those plans for a specific period. However, RSLs can make significant changes to their forecasts over time, with several key factors likely to have materially impacted business plans:
- cost-of-living pressures still impacting tenants;
- growing financial pressure from costs associated with making homes safe and improving their quality, including work on energy efficiency;
- ongoing economic uncertainty, rising borrowing costs, wage inflation, labour shortages – especially in construction and building safety – and higher employer National Insurance contributions;
- risk of further economic disruption from continuing global instability;
- requirement to address defective building cladding with higher spending on fire safety remediation; and,
- requirement for some RSLs to make additional contributions to address pension fund deficits.
Highlights
The aggregate financial position of RSLs has stabilised; however, financial headroom remains significantly constrained. Medium-term projections indicate RSLs face further tightening compared to the previous year. Engagement with individual RSLs on financial matters remains at an unprecedented level, reflecting sustained pressures across the sector. While most organisations continue to address these challenges through prudent management and operational efficiencies, their capacity to absorb additional costs— for example such as those associated with fire safety remediation and the decarbonisation of existing stock—remains limited. In this context, robust governance remains critical to maintaining financial resilience and achieving improved tenant outcomes. Governing bodies will need to ensure that they have reliable, comprehensive information on their homes to inform decision-making and manage any trade-offs in expenditure priorities.
At an aggregate level over the five years to 2029/30, RSLs forecast:
- continued, sustained generation of both operating and net surpluses;
- an average annual rise in turnover of 3.9% (2024, 4.7%) across the projections period which is down on last year and compares less favourably with operating costs than last year which rise by 3.1% (2024, 3.1%);
- compared to previous forecasts total turnover over five years is projected to increase by £355m (2.9% pa) over the period, although this is depressed by a £224m reduction in the release of grants from deferred income which is linked to the reduced development assumptions;
- total operating costs over the five years are up by £436m (4.5%) compared to previous forecasts;
- net cash from operating activities is 4.8% higher than in the 2024 projections, and forecast to reach £937.0m by 2029/30.
- net assets to grow by an annual average of 4.1% (2024, 3.9%)
- aggregate net housing assets will increase to £20.65 billion (2024, £19.99 billion), and net assets to £6.31 billion (2024, £5.72 billion);
- cash reserves remain at a healthy level, with an aggregate closing balance of £662.3 million at March 2025 (2024, £685.2 million) dropping to £497.5 million by March 2030;
- interest cover recovering slightly from that forecast in the 2024 returns;
- rent arrears down and then steadily reducing, from 3.0% in 2025/26 to 2.8% by 2027/28 and thereafter;
- significant capital expenditure of £2.08 billion on existing homes, an average of nearly £6,300 per property;
- estimated decarbonisation costs in the period to 2030 could range from £4.8 billion to £9.6 billion, while RSLs' projections include just £166.8 million;
- a projected 17,600 new homes, to be funded primarily by £2.21 billion of social housing grant (55% of total cost) and £1.56 billion of private finance (39%); and
- total borrowing increasing more slowly and down slightly after five years from £7.21 billion to 7.18 billion.
To sustain services for current and future tenants, RSLs must remain financially viable. However, constrained financial headroom has limited their ability to manage adverse risks and increases the likelihood that governance weaknesses could lead to financial distress. This challenge is compounded by significant financial and operational pressures as RSLs strive to improve existing homes and deliver new housing.
Rising costs for fire safety remediation, damp and mould repairs, and energy efficiency upgrades, combined with higher refinancing rates, labour shortages, and persistent inflation in maintenance and staffing, have created a low-headroom environment that restricts flexibility and heightens vulnerability. Although the sector benefits from secure income streams and relatively low gearing, financial margins have tightened. Five-year forecasts indicate modest growth in turnover and assets but declining cash reserves and reduced capacity to absorb additional costs.
This is occurring at a time when cost-of-living pressures continue to affect tenants, particularly those on lower incomes who continue to face rising costs for essentials, energy, and food. This context informs our focus on affordability as outlined in our Corporate Strategy for April 2024 to March 2027. Increasing financial stress and inflation also raises the risk of arrears, making rental income less secure. While most landlords set rents responsibly and some offer additional support such as financial advice or food assistance, we will continue to work with RSLs to ensure they can demonstrate how they keep rents affordable for tenants. At the same time, RSLs need to maintain financial resilience while supporting affordability. We know that governing bodies are having to consider how to balance investment needs with rent levels, make clear and transparent decisions, and strengthen governance and risk management to safeguard positive outcomes for tenants.
Despite these challenges, expectations of RSLs remain high. Social housing waiting lists in Scotland are at record levels, and the Scottish Government declared a national housing emergency in 2024, underscoring the urgent need for new social housing. Under the Housing Emergency Action Plan, the Government has committed £4.9 billion over four years to deliver 36,000 affordable homes by 2029–30, with RSLs playing a key role in achieving this target.
Robust data is essential for RSLs to achieve their strategic objectives and safeguard tenants while delivering major investments in existing homes—improving conditions, enhancing building safety, and meeting net zero standards—alongside supporting the development of new housing. Our regulatory engagement shows that weak data and inadequate risk management systems often lead to poor outcomes for tenants, highlighting the need for strong governance and effective controls. RSLs should maintain robust risk oversight supported by accurate, current, and comprehensive data on assets, liabilities, home safety and quality, repair status, and tenant complaints. Governing bodies must understand how risks can cascade across the organisation—for example, by stress-testing how property risks could lead to long-term financial challenges if left unresolved—and also test for external shocks that could impact strategic delivery.
Increasing costs and limited rent increases have significantly reduced the financial headroom of many RSLs, impacting their ability to build new homes, maintain existing stock, and provide wider tenant services. Many are scaling back development plans and making trade-offs to manage risk. Governing Bodies must exercise strong judgement to navigate this low-headroom environment, which leaves little margin for error and increases vulnerability to future shocks.
Interest cover for RSLs has been declining since 2020, reaching a low of 200% in 2023/24. In 2024/25, it recovered to 241%, bringing it closer to historical norms. The lower interest cover is largely concentrated among larger RSLs. Looking ahead, interest cover is expected to remain at similar levels as interest rates fall and turnover continues to grow. Liquidity remains strong overall, with total cash and undrawn facilities of £1.60 billion. We will continue to monitor and engage with RSLs that forecast low liquidity or weak interest cover, and we will reflect these findings in our engagement plans.
The weighted average interest rate for new fixed-rate loans taken by RSLs in 2024/25 was 5.3%. This is up 0.3% from 5.0% in 2023/24. Most existing debt is fixed for over five years. However, a sizeable portion of RSLs’ debt is either at a variable rate or will soon require refinancing at higher rates and potentially shorter terms. You can read more about RSLs’ debt in our annual loan portfolio report for 2025.
Voids, arrears, and bad debts remain key indicators of how effectively RSLs manage lettings and rent collection. All three have improved over the last year, with voids and arrears expected to remain stable or improve slightly. However, ongoing financial pressures on tenants could lead to higher bad debts, making it essential for RSLs to continue stress testing for potential income reductions.
Analysis of the FYFP inflation assumptions compared to forecast figures published by the Office for Budget Responsibility in March 2025 shows average rents increasing by more than CPI and RPI in Year 1, with that persisting across the remainder of the projections period, although the gap between rent increases and the inflation measures is expected to narrow over time, matching the OBR assumption by the end of the period
The UK economy has experienced a series of major shocks in recent years, contributing to a slowdown in the rate at which RSLs are delivering new homes. This trend is forecast to continue over the next five years, likely compounded by past uncertainty around the level of grants available from the Scottish Government and ambiguity about future funding. However, this outlook may shift following the Government’s announcement of a £4.9 billion commitment over four years to deliver 36,000 affordable homes by 2029–30. RSLs' forecasts for the 2025 FYFPs show a 22% reduction in the total number of new homes planned, compared to the 2024 FYFPs, which were already 13% lower than the previous year’s projections, and is the fourth year in a row where planned development has reduced. RSLs attribute this decline primarily to rising construction costs and uncertainty over the future availability of grant funding. Although RSLs will generally plan for new developments to be self-sustaining financially, the reduction in the development programme has material impacts across the aggregate financial statements and is a key feature of the changes we see from previous projections to the current ones. Additional pressures, such as increased costs for maintaining existing homes and uncertainty regarding spending on the proposed Social Housing Net Zero Standard, have also contributed to reductions in planned expenditure on new homes.
Development projects carry significant risks, including inflation, labour shortages, supply chain issues, contractor insolvency, and planning delays—all of which can slow delivery and reduce income as rental streams start later. Governing Bodies must provide strong oversight, stress test for cost increases and delays, and ensure resources are used effectively to balance financial and social priorities. Robust skills, controls, and investment appraisal processes are essential. Construction risks can impact timelines, financial viability, and reputation, while many RSLs face tough choices between reduced financial headroom and continued investment in new homes. Our development thematic remains a key reference for RSLs when considering whether to proceed with new development projects.
We continue to ask RSLs in the FYFP return if they have considered the costs of de-carbonisation and to tell us what estimated future costs they have incorporated into their projections. This is a significant risk area that will have a material impact on the funding of business plans, but as yet most RSLs have not set out these costs. Many told us they are waiting for more clarity on the Scottish Government’s proposed Social Housing Net Zero Standard and how this will be financed to determine what they will be required to plan for. In the meantime, many RSLs tell us they are focussing on a “no-regret” fabric first approach to energy efficiency investment. However, it remains a concern that most RSLs lack policy frameworks or cost data for decarbonisation, unlike England and Wales where future impacts are more routinely built into business plans.
We have previously estimated the additional costs of meeting net-zero requirements in the period to 2030 could range from £4.80 billion to £9.60 billion. The current aggregate level of costs included by 39 RSLs in financial projections is only £166.8 million.
It remains crucial for RSLs to maintain adequate liquidity, especially in this period of economic volatility. We will engage with RSLs with low liquidity indicators. We will maintain close engagement with RSLs where our analysis indicates weak financial performance, and this will be reflected in their regulatory status and engagement plans.
