Social Landlords in Scotland: Shaping up for improvement

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Social Landlords in Scotland: Shaping up for improvement.Turnover, Operating Costs and Interest Costs 26.4 In 1998/99 aggregate operating costs represented approximately 72% ofaggregate turnover. By 2007/08 this had risen to almost 90% (see Figure 9below).Figure 9: Operating Costs as % of Turnover100%95%90%85%80%75%70%65%60%55%50%98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08Note: Excludes the Glasgow Housing AssociationSource: Accounts Consolidation System, Scottish Housing Regulator6.5 Figure 9 shows that, although the rate of increase has not been uniform, thereis a clear emerging trend that is not sustainable over the next ten years. Weare exploring the factors that underpin this trend.6.6 Apart from operating costs, RSLs have to service the debt that has been usedto finance their activities. Figure 10 (below) illustrates the relationshipbetween turnover and total costs. The graph shows that in 2007/08 totalcosts (operating costs plus interest costs) amounted to more than 100% ofaggregate turnover.2 Figures in this section exclude the Glasgow Housing Association33
Social Landlords in Scotland: Shaping up for improvement.Figures 10: Operating and Debt Servicing Costs as % of Turnover120%100%80%60%40%20%0%98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08Operating costsInterest costsOperating + Interest costsNote: Excludes the Glasgow Housing AssociationSource: Accounts Consolidation System, Scottish Housing Regulator6.7 This analysis is based on the aggregate turnover and aggregate costs overthe whole sector. This means that while some RSLs may have a satisfactoryratio of operating costs to turnover, others will not. We will work closely withorganisations that have less satisfactory financial positions, but we expect allRSLs to give greater attention to managing their cost base. The ability tomaintain a sustainable ratio between cost and turnover will be an importantfactor in determining how we engage with each RSL. We have identifiedaround twenty RSLs where total costs, plus interest charges, have exceededturnover in each of the three years to 31 March 2008 and thirteen whereoperating costs alone exceeded turnover in 2007/08, the last year for whichwe have fully audited accounts. We are currently considering the implicationsof this and, in particular, we will examine the extent to which the currentfinancial position is consistent with their underlying business planning.Rent Levels6.8 After allowing for the effect of inflation the average rent paid per unit has risenby less than 0.5% per annum in real terms during the period under review.This is illustrated in Figure 11. We have presented figures that take accountof the impact of Glasgow Housing Association (GHA).34
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Social Landlords in Scotland: Shaping up for improvement

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