Housing association operating surpluses at record levels despite rent cut, says Moody's

Landlords compensated for the rent reduction through “efficiency savings and cost cutting initiatives”, including reducing spend on repairs and maintenance.

The report’s co-author Matt Fawcett said: “The increase in profitability in 2017 was driven primarily by cost reductions across the core social housing letting business, including cutbacks on maintenance costs and major repairs."

The report also highlighted the sector’s increasing reliance on market sale activity. Income from market sales doubled as a proportion of revenue in the 2016/17 financial year to stand at 18 per cent of turnover.

In 2017/18, social rented homes will make up less than half of the 23,700 units expected to be built. This proportion is expected to reduce to 36 per cent in 2018/19.

Social housing lettings represented 69 per cent of turnover in 2016/17, but this share has reduced every year for the last five years.

It added that the sector’s growth continues to be funded by debt, topped up by operating cash flow and government grants. Aggregate debt rose by 13 per cent.

The report said that the sector’s stable outlook is "supported by a predominantly favourable policy environment, with greater support for the social rented sector".

Moody’s has public ratings on 40 HAs in the UK. Within England, the portfolio represents 17 per cent of all housing associations with more than 1,000 units but accounts for 39 per cent of the social housing units managed.