Analysis of the Finances of Registered Social Landlords 2020/21

Read the highlights and executive summary or download the full report below.

Published

12 May 2022

Updated

12 May 2022

Highlights

Like other areas of the economy and society in general, Scottish Registered Social Landlords (RSLs) have been affected by the unprecedented events of recent years; however, most landlords moved at pace to adapt to the new and challenging operating environment in which they found themselves.  Our analysis for 2020/21 is that RSLs have achieved this whilst generally delivering a robust financial performance, backed up by strong liquidity. It is worth noting that over the period of analysis some RSLs received furlough payments and aggregate maintenance costs fell as restrictions meant they had to be deferred. 

Turnover  RSLs increased aggregate turnover by 0.6% to just over £1.80 billion in 2020/21.  Affordable lettings income went up by 0.5% to £1.59 billion, contributing 88% of turnover.

Surplus  RSLs reported an aggregate surplus of £309.8 million for the year to 31 March 2021, showing a continuation of the upward trend of recent years.  The net margin increased from 14.0% in 2019/20 to 17.2% in 2020/21.

Available Cash  RSLs increased cash balances significantly in 2020/21, up £155.0 million (18.5%) to £990.6 million.  Quarterly COVID-19 returns submitted during 2021/22 show an overall reduction in cash balances across the year, dropping to £928.6 million at 31 March.

Cash Generated  RSLs maintained a strong financial position at the end of 2020/21, with cash generation up £102.4 million to £626.6 million, and interest paid on debt down £9.6 million to £181.6 million.

Interest Cover  Increases in operating margins caused a 23-percentage point rise in EBITDA MRI interest cover (Earnings before interest, taxation, depreciation & amortisation, major repairs included), which was up to 285% for 2020/21. 

Housing Investment  RSLs continued to invest in new and existing homes, with net housing assets up £406.0 million (3.0%) to £14,060.5 million during 2020/21. That said, levels were below those forecast as a consequence of pandemic related restrictions.

Borrowing  RSLs increased available debt facilities to £6.41 billion at 31 March 2021, of which £5.36 billion has been drawn down, with a balance outstanding of £4.71 billion.  Whilst RSLs agreed new facilities of £0.66 billion in 2020/21, a drop in spend in the year meant available undrawn facilities of £1.05 billion at 31 March 2021.  This, and increased cash balances, means sector liquidity remains strong.  Borrowing is set to further increase with a forecast requirement for an additional £1.3 billion over the next five years to fund investment in new and existing homes.

Rents & Inflation  In aggregate, rent increases were above CPI inflation in 2020/21.  Aggregate rents are projected to increase by more than inflation for the majority of the next five years; however, many RSLs have moderated their rent increases down for 2022/23 in response to the circumstances brought about by the pandemic and other economic challenges.

Voids, Arrears and Bad Debts  Voids, arrears and bad debts at 31 March 2021 either remained around the previous years’ levels or showed some improvement, demonstrating the positive impact of the work done by RSLs to mitigate these.  RSLs are also forecasting reductions over the next five years.

Pensions  The move to defined contribution (DC) schemes by RSLs who previously offered only defined benefit (DB) schemes has continued, but at a slower rate than in previous years.  There are now 77 RSLs who only provide a DC scheme for employees, up from 69 in 2019/20.

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