The Regulator of Social Housing (RSH) latest quarterly survey reveals that the social housing sector’s registered providers are facing substantial pressures and continue to operate within a very challenging and fast-moving economic environment.

According to the RSH, high inflation, shortages in labour and materials, increasing borrowing costs, and higher spend on repairs and maintenance continue to impact on providers’ operating costs.

Providers invested £6.9 billion over the past year on repairs and maintenance, and expect to invest a further £7.9 billion over the next 12 months, the survey reveals – the higher spend a result of repairs relating to damp and mould, building safety works, investment in energy efficiency and inflationary pressures.

According to the RSH, higher interest rates and increasing investment in existing homes have reduced providers’ interest cover (excluding sales income), which averaged at 87% over the past financial year. This is the lowest figure recorded in the regulator’s quarterly surveys, and continues the trend of weakening interest cover as providers spend more on repairs.

The regulator says it is continuing to monitor this trend, and it was a factor in many of the viability regrades in its recent stability checks of providers’ financial viability. It expects boards to carefully manage their risks, particularly their headroom to comply with interest cover covenants.

Providers also continued to build and acquire new homes, with £13 billion invested over the past year (compared to £12.7 billion the year before). Providers expect to spend a further £16.8 billion on new homes over the next 12 months (of which £11.4 billion is contractually committed).

Despite these substantial financial pressures, the sector continues to have a strong liquidity position and attracted £9.9 billion in new finance, taking total agreed facilities to £123 billion. Undrawn facilities are at a historically high level and a large majority of debt is on fixed rate terms.

Jonathan Walters, Deputy Chief Executive of the Regulator of Social Housing, said: “Providers continue to face significant economic challenges, including high borrowing costs and inflation. Boards need to take a strategic approach to managing these risks, to ensure they can continue to deliver tenant services, increase repairs and maintenance, and invest in new homes.”

The regulator’s quarterly surveys are available on its website.