SFHA Covid-19 briefing series: finance

SFHA has produced a series of 10 briefings to help social landlords through the coronavirus emergency. This blog focuses on our finance briefing. 

While the immediate focus for SFHA members when the seriousness of the coronavirus outbreak became apparent was to ensure continued service for tenants, finance teams also acted quickly to prepare their organisations for the financial impact. 

With the lockdown coming near year end, finance staff had to act quickly to revise business plans and review budgets. The stress testing of various scenarios covering different projections on reduced rental income, increased bad debts and varying timescales for a return to ‘normal’ – as well as so much more – took place as a matter of priority. 

At SFHA, our initial work was to speak to members to establish what issues might arise as a result of the pandemic. This resulted in a number of asks of lenders, government and regulators to ensure associations can remain compliant and viable during the current crisis and the recovery process. 

Fortunately, the sector’s concerns have been heard, and SFHA continue to work with lenders, government and the regulator to resolve issues and plan for the long road to recovery. Finance issues feature regularly on the weekly Scottish Social Housing Resilience Group calls, and we have also set up a specific financial resilience group which you can read more about here.  

Support offered by government is set out in SFHA’s finance briefing as well as further details on those asks mentioned above and some of the assumptions the social housing sector has used to prepare for what might lie ahead. 

The full extent of reduced rental income, although being felt already, is currently unknown. This is why SFHA is launching a data return to gather information on arrears, bad debts, number of tenants on housing benefit/Universal Credit, interest cover, average costs, net profits and average interest paid/received. This data collection will be issued monthly and will be used to build a picture over time of the financial impact this crisis is having on housing associations. 

The financial impact will be felt far beyond 2020. This evidence is vital if we are to successfully convince the government that our sector needs financial support. SFHA hopes all members will support us in this effort. 

Discussions are now beginning to focus on how the sector can play its part in the economic recovery of Scotland. It is widely acknowledged that housing associations contribute to a number of the Scottish Government’s strategic priorities, such as reducing poverty, increasing the number of affordable homes and ending homelessness, so, as a sector, we are well placed to support the recovery. However, in order for SFHA members to build the homes Scotland needs, we need a commitment to adequate funding and support from government on a long-term basis. 

Considerations are also currently being given to how the backlog of capital spending can be managed without breaching loan covenants. Flexibilities in this area have been raised with lenders, and we are hopeful any obstacles can be overcome. 

And another issue of concern for a number of members, around the deadline for submitting audited annual accounts looks likely to be resolved soon. In the next round of emergency legislation to be put before the Scottish Parliament, the draft Coronavirus (Scotland) (No2) Bill proposes an amendment to section 70 of the Housing (Scotland) Act 2010, in respect of the financial year ending with 31 March 2020, RSLs will be able to submit audited annual accounts to the Scottish Housing Regulator within nine months of the end of the period to which they relate instead of six. It appears this proposal has enough support to pass, and we will update members of its passage through parliament. 

All of these issues, and more, can be discussed in SFHA’s online finance forum on Microsoft Teams, exclusively for SFHA members. If you’d like to join, please email me at smitchell@sfha.co.uk 

I am also always keen to hear from members about their experiences with lenders in relation to coronavirus concerns – or any other matters SFHA can support with. 

You can also read the full finance briefing from late April here.