Southern Housing reports £8m deficit after building safety costs and drop in investment property values

Southern Housing has reported a deficit in its latest annual financial statements.

The 73,000-home landlord reported a deficit of £7.7m in its accounts for the year to 31 March, compared to a £4.8m surplus the previous year.

The figure was hit by a £49m building safety provision while adverse movements in the value of investment properties cost the group £26m in the year. It said this was due partly to increased build costs on recently completed commercial schemes.

However the group’s operating surplus rose 9% from £123.2m to £133.9m and would’ve hit £183m without the one-off building safety provision.

Southern said its operating margin excluding sales and building safety costs was 19.8%, below its target of 21% due in part to £2m of costs relating to its Eastgate scheme in Woking, which was evacuated in 2023 due to safety concerns, There were also impairment costs of £2m and regeneration scheme totalling £4m.

As previously announced by Southern, the group increased its overall turnover by 7% from £673.7m to £719.4m. Much of the increase was due to a £38m increase in social housing lettings income to £623.4m. Its market sales income nearly doubled from £13.5m to £26m while its first trance shared ownership income was £45.8m, similar to last year’s figure of £45m. Income from market rent fell by £1.4m while student accommodation income dropped by £2.7m.

The accounts confirmed that Southern Housing started just 39 homes in the year, as previously announced, down from 127 the previous year. This was due to Southern’s decision announced in 2024 to halt entering new development commitments until its interest cover position improved.

The group said its cash interest cover golden rule (EBITDA major repairs included cash interest cover excluding sales) has improved from 28% to 48% and it expects to hit 100% by 2029. The group has announced a “measured return to development” from this year.

Tom Paul, chief financial officer at Southern, said: “The turnaround is due to two principal factors; firstly, that the balance of uncompleted homes in our development programme is reducing, and we are bringing in more rental income on homes that are completed; and secondly, that we have made great strides in driving cost efficiency. We have now achieved £25m in efficiency savings since merger, £14m of which was delivered during 2025/26”

Southern completed 937 homes in the year, up from 807 the previous year.

The group also increased its investment in existing homes from £286m to £291m year-on-year.

Southern earlier this year unveiled a new, four-year strategic plan aimed at improving its repairs services, achieving the highest consumer regulation grade and fixing its finances.

Southern was the 10^th biggest housing association in the UK last year, according to Housing Today’s exclusive Largest 50 Housing Association analysis.