The newly released 2024 Sector Risk Profile highlights how much the housing sector’s operating environment has shifted in just one year. The intensifying financial and strategic pressures are a continuation of the challenges flagged in 2023 but have grown more acute, as providers navigate competing demands with shrinking financial capacity. Here are some of the key themes and how they compare to the 2023 profile:
1. Financial Viability Remains Under Pressure
In 2024, interest cover across the sector has dropped below 100% for the first time since 2009, reflecting record expenditure on existing stock and the high cost of debt due to sustained interest rate rises. Forecasts over the next five years put sector-wide interest cover at a fragile 111%.
This builds on concerns from 2023, when interest cover was forecasted to fall to 106%, with providers already facing rising borrowing costs and constrained rental income from the 7% rent cap. The increasing strain is evident, making robust governance frameworks critical for maintaining financial viability.
2. Stock Quality, Safety, and Compliance
2024 continues to emphasize tenant safety and the urgency of addressing critical building defects. While there’s been progress in fire risk assessments, a worrying number of buildings still lack clear remediation plans, especially for life-critical safety issues. Meanwhile, damp and mould remain a top priority following high-profile incidents.
In 2023, we saw the early ripple effects of tragedies like Awaab Ishak’s death, driving a renewed focus on stock condition and tenant safety. Both years highlight the need for accurate, up-to-date data to manage these risks, but 2024 signals a greater urgency to act as the regulatory environment tightens.
3. Development Slowdown
The 2024 report points to a significant slowdown in new developments, with a forecasted 12% reduction over the next five years. This is particularly notable in outright sales and low-cost homeownership, where providers are deferring uncommitted developments to cope with financial constraints.
2023 also saw reduced development activity, with a 25% drop in planned market sale units over the next five years due to the housing market downturn. The continued strain on the sector’s development pipeline is impacting the supply of new homes, especially in urban areas where costs are highest.
4. Data Integrity and Cyber Security
Accurate, robust data systems are a critical focus in 2024, underpinning risk management, regulatory compliance, and effective tenant engagement. Boards are expected to manage data risks proactively, ensuring that stock condition, safety, and performance data are reliable and support decision-making.
This builds on the 2023 profile, which also stressed the importance of data integrity, particularly with the introduction of tenant satisfaction measures and new consumer standards coming into force in 2024. The ability to manage data effectively is increasingly tied to governance and regulatory performance.
5. Labour Shortages Continue to Strain Service Delivery
Labour shortages are biting harder in 2024, with providers struggling to recruit the skilled trades needed to meet growing demand for repairs, maintenance, and remediation work. Damp and mould remain critical concerns, as tenant expectations increase.
These issues were already prominent in 2023, where skills shortages and inflation drove delays in repair and maintenance programmes. The labour market remains tight, with further pressure expected as providers strive to meet new regulatory requirements and timelines.
What This Means for Housing Providers
Boards are facing increasingly difficult decisions as they balance investment in current homes, compliance with safety standards, and the need to deliver new social homes. With financial headroom shrinking, robust governance, clear strategic direction, and proactive risk management are more critical than ever.
The 2024 profile signals that the challenges flagged in 2023 have now crystallized, putting more pressure on providers to act decisively. With new consumer standards and tighter scrutiny in place, how are you managing these competing demands in your organisation?
If your organisation needs support in navigating these risks and increasing risk maturity, House of Risk is here to help. We offer expert guidance to strengthen your risk management framework and ensure you're prepared for the challenges ahead. Reach out to learn more!
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