RMI contractors’ output in 2020 fell due to the impact of the Covid-19 pandemic. While most social housing providers have been able to maintain essential responsive repair services, the provision of planned maintenance has been impacted.
Capitalised RMI expenditure for the year was £1.6bn, against a £2.4bn forecast for the year as of January 2020. This was because of lockdown restrictions and social distancing measures, limiting the ability of workers to carry out planned maintenance works.
Between 2000 and 2018, the level of social housing RMI contractors’ output had been on a downward trajectory. In 1997, £9.3bn of RMI work was carried out on five and a half million social homes but by 2010 there were less than four million. A key reason for the year-on-year decrease in output between 2016 and 2020 was the annual 1% cut in rents brought about by the government in 2016, which lead to falls in rental income and hence less to invest in property.
The impact of the arrival of the pandemic in Q1 2020 does not show up in the annual financial accounts of housing associations and the housing revenue accounts (HRAs) of local authorities for 2019/2020. However, once published later in 2021, the 2020/2021 annual accounts are expected to show a fall in revenues and expenditure.
The falls in revenues are indicative of the increase in rent arrears, due to both the furloughing of tenants by their employers and the inability to work due to covid-19 infection or the loss of jobs. Social housing tenants in employment typically work in sectors that have proved vulnerable to the impact of the pandemic such as public transport, healthcare, hospitality and retail. However, with the fall in infections, the success of the vaccination roll-out programme and the easing of restriction, over the medium-term landlords will be able to recover lost income from rent arrears.
Abdul Tantouch, Research Analyst at AMA Research comments “other than the negative impact of Covid-19 on planned maintenance expenditure by social housing providers, since 2018 the key issue within the social housing RMI sector has been the high level of investment in fire remediation works in the wake of the Hackitt report into the Grenfell Tower tragedy. Estimates of the final costs of removing unsafe cladding and implementing other fire safety measures range from £10bn up to £15bn. For many housing associations, fire safety works are continuing throughout 2021 and possibly into 2022. Over the longer term, the main driver for RMI growth is likely to be decarbonisation programmes, underpinned by the government’s commitment to the 2050 net zero carbon target.”
Lockdowns, and other measures to limit the spread of the virus, have resulted in much RMI work being suspended due to the risk of maintenance staff being in close contact with people in their homes. While most landlords have been able to maintain emergency repair services, planned maintenance/improvement works have had to be suspended. Over the next year or two growth is expected to resume, mainly underpinned by ongoing fire remediation works. Over the next couple of decades, decarbonising social housing stock is expected to be the key growth driver.