Housemark analysis of 2020/21 financial statements released today (Friday, 5 November) shows operating margins have predictably improved as a result of slowed pandemic expenditure.

The average[1] overall operating margin for UK housing associations improved last financial year to 24.4%, from a 2019/20 average of 23.6%.

Operating margins for social housing lettings grew from 26.5% to 26.8% over the same period.

The findings are based on published 2020/21 financial statements for over 200 housing associations UK-wide, that have only just been released and exclusively analysed by Housemark and including all registered providers with over 5,000 units. This exclusive, sector-wide analysis has revealed:

-Increases in margins relate primarily to decreases in expenditure linked to delays to major works programmes during the pandemic, as well as decreases in some management cost sub-categories.

-The headline social housing cost per unit decreased from a 2019/20 average of £3,664 to a 2020/21 average of £3,565 – a drop of around 2.8%.

-The decrease in overall unit costs is driven primarily by a 16% drop in major works capital spend per unit, as major and cyclical programmes during the pandemic were paused or delayed.

-Around 40% of housing associations recorded drops in management expenditure, relating to precipitous falls in certain corporate cost lines. Notably expenditure in areas such as recruitment fees, legal fees, consultancy, and premises utilities was severely muted during the pandemic

-Reinvestment fell on average from 7.4% to 5.9% as development programmes were delayed. New supply still increased by an average of 1.2% but this is down from 1.6% the previous year.

-Gearing decreased slightly across the sector and interest cover (EBITDA MRI) improved in line with better margins.

Although the 2020/21 figures have been largely driven by the decisions taken during the pandemic, when coupled with Housemark’s exclusive covid impact metrics and monthly pulse data – which collectively covers 20 months of both pandemic performance and recovery progress it is apparent that the strongest performing providers have pivoted service delivery and spend towards increased resident engagement and digitalisation. This increased focus has led to an acceleration of digital first strategies with top performers now reporting circa 50% of all customer contact delivered through digital channels, versus a pre pandemic sector average of around 20%. As spend levels recover, those landlords delivering a more efficient, agile service are more likely to be able to unlock greater capacity to tackle the complex challenges the sector faces.

Overall, social housing cost per unit increased by around £500 between 2017/18 and 2019/20 as landlords invested significantly in building safety. Operating margins today remain well below their 2017/18 average of 26.4%, reflecting the multiple operating environment priorities.

As major works programmes return to speed and landlords continue to invest in both building safety and decarbonisation of existing stock, unit costs are expected to increase further in 2021/22 applying further pressure on operating margins.

Pressure is likely to be exacerbated by wider factors such as the increasing cost of materials and labour. Expenditure on information technology is also climbing as landlords continue to invest in systems integration, data quality, real-time reporting, and digital channel shift, although many landlords are prioritising this investment to help unlock further financial capacity to tackle the current challenges the sector faces.

2020/21 Lower quartile Median Upper quartile
Operating margin overall (%) 18.7 24.4 28.8
Operating margin – social housing lettings (%) 22.5 26.8 32.6
Headline social housing cost per unit (£) 3,170 3,565 4,272
Gearing (%) 30.1 42.6 52.1
EBITDA MRI (%) 150 189 254
Units developed as a % of units owned 0.6 1.2 2.0
Reinvestment (%) 4.0 5.9 8.2
Return on capital employed (%) 2.5 3.3 4.1


Talking about these findings, Housemark Director of Data Jonathan Cox said ‘’Housemark has been providing on-time insight, analysing the impact of the pandemic and the recovery journey since March 2020 on operational performance, resident satisfaction, and landlord costs to help the sector navigate an ever changing, volatile landscape. This analysis of 2020/21 financial statements shows that although operating margins have improved, this is largely driven by the pandemic and we expect unit costs to increase in this current financial year. Whilst customer expectations have returned to normal times levels, landlords continue to grapple with a range of external factors. Good quality data and intuitive systems are vital in achieving improvements in customer experience and service quality alongside the delivery of operational efficiencies to unlock the capacity to invest in areas such as building safety, quality, and decarbonisation.’’

[1] All averages quoted are median averages