Introduction Updated

The aim of the Housing Finance Manual is to support housing association staff, board members and other stakeholders in their understanding of financial management and governance.

The manual is a guide aimed at social housing landlords or ‘housing associations’ registered in the UK. While different terminology may be used to describe these organisations (eg ‘registered providers’ or ‘registered social landlords’) the generic description ‘housing association’ is used throughout the guide.

For each of the main areas of relevance to housing associations the guide aims to:

• provide a general background
• discuss current issues and highlight emerging themes
• explain regulatory requirements
• assist users in the day-to-day application of process and procedure.

Where more detailed information is considered necessary, readers are signposted to appropriate sources.

Most of the guidance applies to the UK in general but, for the most part, the individual sections concentrate upon the position in England. There are situations where practice in Scotland, Wales and Northern Ireland may vary. Issues that are unique to Scotland and/or Wales are discussed in detail in the respective Wales and Scotland sections.

The guide provides an overview of housing association finance and is not intended to be a detailed technical guide to all the practical issues relating to the finances of social housing that the user is likely to encounter. Neither is it intended to provide a definitive guide to the structure or broad legal constraints within which housing associations and other providers of social housing operate, and which therefore need to be taken into account in any commercial dealings with them. Links to other websites or reports are included throughout the manual to direct any user who wishes to study an area in greater depth or detail.

In the context of social housing finance, the key bodies or types of organisation are:

• housing associations, which together develop, own and manage some 3 million properties
• the Ministry for Housing, Communities and Local Government (MHCLG), which provides the prime strategic and political direction for the provision of social housing in the UK
• Homes England, an executive, non-departmental public body sponsored by MHCLG; the national housing and regeneration agency for England, whose role is to improve the quantity and quality of housing through investment and enabling (in London, the GLA undertakes a similar investment and enabling role)
• the Regulator of Social Housing (RSH), an executive, non-departmental public body sponsored by MHCLG, the Scottish Housing Regulator for Scotland, and the Welsh Government for Wales, all of which have a responsibility to set and enforce standards in the sector
• accounting standards bodies, which have a role in determining the format and presentation of the accounts
• trade bodies (including the National Housing Federation, the Scottish Federation of Housing Associations, Community Housing Cymru and the Northern Ireland Federation of Housing Associations), which seek to influence the overall direction of social housing finance and provide guidance and assistance in the provision of social housing
• local authorities, which may also provide housing but have a role in setting local policies around allocation and planning as well as enabling additional supply, and arms-length management organisations (ALMOs), which are owned by local authorities and manage housing stock on their behalf
• commercial funders, which provide day-to-day and longer-term finance
• HMRC, which enforces tax and other compliance with particular impact for housing associations including VAT, stamp duty land tax (SDLT) and corporation tax.

Other bodies such as the Charity Commission, Care Quality Commission (CQC), Companies House, the Financial Conduct Authority, the Welsh Government, the Scottish Government and the Department for Communities in Northern Ireland may also be relevant, depending on an individual housing association’s constitution and location.

Social housing finance has seen a number of significant changes over the last 50 years or so, and this shows no sign of coming to an end.

Legislative context

For many housing associations, the incentive to develop and provide more housing was found in the Housing Act 1974, which provided a generous grant structure. In 1988, it was recognised that housing associations should receive a percentage grant in respect of each development, raise the difference through the money markets and be responsible for setting their own rents. At the same time, the need for significant investment in local authority stock started a series of large-scale transfers of council housing to housing associations, which borrowed from the financial markets to fund that investment.

Over time, the proportion of capital cost provided by grant has reduced, with the majority of development costs often being met from other sources. These include the ability to charge higher levels of rent to enable the increasing percentage of private finance to be funded.

In addition, housing associations have explored more diverse activities as a way of cross-subsidising more traditional and less economic areas of business, or in some cases have withdrawn from areas of business such as supported housing that often deliver lower returns so they can concentrate on investment in core social housing.

Rental income is core for most housing associations, forming a high proportion of overall income for the great majority. Returns from social rents are an important source of funds for investment in both new and existing homes, with rental income a key plank of associations’ business plans. Government rent policy is of huge significance for the financial health of individual housing associations, and for the social housing sector as a whole.

From 2001 until the introduction of the Welfare Reform and Work Act 2016, it was government policy to contain rent increases by referencing average increases to the retail price index (RPI) and harmonise social housing rents in a local areas irrespective of landlord.

However, with an increased focus on reducing public expenditure, the Welfare Reform and Work Act 2016 introduced a requirement to reduce rents by 1% each year over a four-year period from April 2016 to March 2020. In October 2017, the government announced that increases in social housing rents limited to the consumer price index (CPI) plus 1% would be permitted for five years from 2020. High levels of inflation led to the increase in 2023/24 being capped at 7%. In June 2025 the government announced a ten-year rent settlement that includes CPI+1% until 2035/36 (final year ending 31 March 2036).

Other changes linked to welfare reform have impacted the financial arrangements of housing associations and will continue to do so. Roll-out of the universal credit full service is substantially complete and the Department for Work and Pensions (DWP) is working to move all remaining existing benefit claimants to the universal credit full service. The reforms are having a challenging impact on both housing associations and their tenants, with increasing evidence of higher collection costs and arrears.

The role of the RSH

The Regulator of Social Housing (RSH), which was created as a separate entity in 2018 after assuming the regulatory responsibilities of the HCA, regulates the environment in which housing associations operate.

The RSH’s purpose is to regulate registered providers of social housing to promote a viable, efficient and well-governed social housing sector able to deliver quality homes and services for current and future tenants. The registered providers include stock-owning local authorities and housing associations, both not for profit and for-profit.

Regulation by the RSH is underpinned by legislation through the Housing and Regeneration Act 2008 and subsequent directions from the government. The regulation is enforced through a range of regulatory standards that have evolved since 2010 and fall under two broad headings: economic and consumer.

Demand for more affordable housing continues at high levels but housing associations always need to make sure that the homes they let or sell are of good quality and, in particular, meet all legal and regulatory obligations to keep residents safe in their homes. Housing associations need to identify new opportunities for development and new ways of raising money but will be mindful of risk, which needs to be managed effectively.

The economic standards set an expectation that associations have clear risk management frameworks, including asset and liability registers and robust business plans that are stress-tested to reveal weaknesses, which can then be mitigated. Value for money also remains a priority and is the subject of a separate regulatory standard requiring housing associations to measure and report efficiency using a range of performance indicators that aid comparison between associations, as well as demonstrating changes in performance for the sector as a whole.

Recent developments

The fire at Grenfell Tower in June 2017 brought about a big change in emphasis for housing associations, increasing the focus on health and safety within associations’ stock and strengthening the role of residents in holding landlords to account for the services they receive. Subsequent changes within building regulations have meant that housing associations have had to review their business plans, in particular the level of investment in existing stock, with an emphasis on building safety and landlord health and safety compliance.

The Social Housing Regulation Act 2023 introduced significant changes relating to consumer regulation of social housing with responsibility for regulating all social landlords in England, including local authorities, falling under the RSH. The changes, which took effect from 1 April 2024, included proactive consumer regulation covering safety, landlord performance, complaints, tenant voice, quality and home ownership.

The new legislation also increased the powers of the Housing Ombudsman with housing associations required to comply with the Complaint Handling Code and the Ombudsman required to monitor compliance with the Complaint Handling Code.

Further significant changes that are expected to be implemented more gradually are ‘Awaab’s Law’ (phase 1 in October 2025), requiring social housing landlords to investigate a wide range of serious potential hazards (including damp and mould) and address them within specified timeframes; new electrical safety regulations requiring testing every five years (also in October 2025); the Competence and Conduct Standard (from October 2026 with a three-year transition), relating to qualification and expertise of housing professionals; and Social Tenant Access to Information Scheme ‘STAIRS’ (April 2027), providing tenants with access to information on request.

The increasing understanding of the impact of housing on the environment is starting to lead to expectations and requirements to respond. This impacts new housing, but energy use in existing housing will need to reduce in the medium term, creating the requirement for major investment in the next decade and beyond. The first stage for many housing associations is a drive to bring their properties to EPC C or higher by 2030, but with further costs to bring stock to net zero by 2050 starting to be reflected in long-term plans.

In response to the legislative and regulatory changes, we are seeing continued changes within the sector as housing associations adapt to the new and evolving environment. In particular, the need to be more efficient and create development capacity is seeing ongoing consolidation, both among small and medium-sized organisations and some of the larger ones, notably in London and other urban centres where building safety and net zero costs are having a significant impact, reflecting the high-rise nature of much of the housing stock.

We hope you find this introduction and guide helpful and encourage you to use it as a reference source for topics that are most relevant for you. Further information and guidance are provided in the subject sections that follow.