Housing association increases surplus but new build activity hit by Covid-19

Bromford has increased its net surplus by 28% but missed targets for reinvestment and completions amid covid-19 disruption.

The Wolverhampton-based housing association, one of the largest developing housing associations in the country, posted a net surplus of £62.1m in its accounts for the year to 31 March 2021. This represented a 28% increase on the £48.3m the year before and was due to increased value of its financial instruments and a loan breakage cost constraining the previous year’s figure. Its pre-tax operating surplus increased from £97.4m to £98.5m

However, turnover at the 44,000-home social landlord fell slightly from £270.8m to £266.1m, with shared ownership sales income falling 36% to £27m.

The group’s completions also dropped from 1,027 last year to 902, which meant it missed its targeted 1,300 new homes for the year.

The amount of money invested in new supply fell 26%, from £152m last year to £112m. It did not hit its reinvestment target of 9.8%, with the amount invested in new supply and existing stock in the year equivalent to 5.1% of the group’s total property value.

This is also down on the 6.8% posted last year. Housing associations and other registered providers of social housing are required to measure themselves against the reinvestment metric as part of the Social Housing Regulator’s value for money standard

Bromford said the missed reinvestment target was” a result of the pandemic which resulted in the shut-down of sites for periods of the year”

It said however that in 2021/22 it is forecast spending £201 million on new homes and has set a reinvestment target of 8.1%.

Robert Nettleton, chief executive of Bromford, said: “We completed 902 new homes, including 206 built by Bromford Developments Limited our in-house contractor.

“Our target for the year was 1,300 new homes and this was impacted by both the COVID related shut down and careful reopening of our direct sites and partner sites. The deferral of our planned programme has been rescheduled largely to the 2021 to 2022 financial year whilst we expect to deliver just shy of 1,300 new homes of all tenures in the same period.”

Bromford last year secured a £100m loan from L&G to help deliver 12,000 homes over eight years.

The report said the group is “well on course” to increase its new homes completed per year to more than 1,400”

It said: “This will help maximise the existing balance sheet capacity and utilise the ongoing stable operating surplus”


What are housing association surpluses?

Housing association surpluses are calculated by deducting expenses from income. They differ from profit as they are not paid to shareholders but instead re-invested in building homes and funding services.

Associations aim to post surpluses over a period of time to maintain lender and investor confidence, assure the regulator of an organisation’s viability and to ensure the business is well-positioned to cope with unforeseen events. Surpluses can be used as future working capital to enable organisations to fund development while reducing their reliance on grant, debt or other types of funding.