There is a huge reduction in the ‘Net Present Value’ (NPV) of social housing across most of the country due to rent cut, according to new research by Savills Housing Consultancy
NPV is the ‘rental income the landlord can expect over a four-year period less cost’; it is the value of social housing to the landlord.
Here are the findings of the research which was based on information gathered on 420,000 homes, according to Inside Housing:
London was the only area where NPVs increased
There was a peak of 38.3% in the southwest
There was also an average fall of 15.9% elsewhere
Landlords had not yet put plans in place to cut back costs, which would see the value of properties rise
Most landlords have responded by reducing planned maintenance spend to deliver an immediate reduction in expenditure
Because of rules protecting lenders from the rent cut if the repossess a home, valuations for loan purposes do not fall as quickly
However, over the four year period of the rent cut, they will start to deteriorate
Head of Savills Housing Consultancy, Mervyn Jones, said:
“The data shows that, in general, housing providers are responding to the rent cut by making savings in planned maintenance, but to maintain NPVs they need to go further and look at reducing day-to-day costs. This latter aspect does take longer, but it must be part of a balanced approach to cost savings.
“If housing providers do not take further action, it is likely that this will reduce their financial capacity to develop homes. There is a risk that it will potentially seriously affect their business plans as it feeds into loan covenants.”
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