This report does not constitute a rating action.
We consider the regulatory frameworks for social housing providers (SHPs) in the U.K. to be as strong as those in most other regions globally. However, we consider that England's framework is weaker than those in the devolved regions of Scotland, Wales, and Northern Ireland. Our view reflects less ongoing financial support for both capital and operating spending in England compared with the other parts of the U.K., where the sectors receive more adequate funding.
We view oversight as solid across all regions, although we consider regulatory scrutiny to be more rigorous in England and Scotland than in Wales and Northern Ireland.
While the regulation in the devolved regions typically follows English guidelines, SHPs in the devolved regions generally have more flexibility over rent-setting. Furthermore, government intervention has had a more adverse impact on English SHPs over the years.
England
Major Factors
| Overview | |
|---|---|
| Key strengths | Key risks |
| Solid ongoing oversight by the English Regulator of Social Housing (RSH). | Negative impact from government intervention in the rent regime, which weakens the predictability of the sector's operating environment. |
| Important public policy mandate to provide homes at sub-market rents. | Increased investment requirements without adequate support from grants. |
We assess the regulatory framework under which English SHPs operate as strong. This assessment reflects the providers' public policy mandate to provide affordable homes and support their tenants by charging lower rents than the prevailing market rent. We continue to positively assess the extremely solid oversight by the RSH, which monitors the financial viability, governance, and consumer standards of the registered SHPs. This allows the RSH to identify early indications of financial or operational difficulties, and act on them in a timely manner, often by brokering mergers.
English SHPs' financial indicators are under pressure. The government has extended the current long-term rent settlement by one year to March 31, 2026. This allows SHPs to increase social and affordable rents by Consumer Price Inflation (CPI) plus one percent. Under this settlement, rent increases are supposed to allow SHPs to finance their operating activities, with the one percent uplift meant to support the development of new homes. However, the English SHPs' financial indicators are under pressure due to government intervention in rent-setting, with the most recent intervention occurring amid high inflation.
More important, however, is the government's requirement for the SHP sector to improve the quality of the existing housing stock. The sector needs to make investments to address fire and building safety regulations, make homes more energy efficient, and meet enhanced consumer standards to protect tenants. More grant funding has been forthcoming to the sector to cover these investments, but we consider that the current allocation is unlikely to be sufficient.
Repeated government intervention creates uncertainty for the sector. Against the backdrop of high inflation, the U.K. government limited increases in social and affordable rents in England to 7% in the fiscal year ending March 31, 2024, a materially lower level than the CPI plus 1% increase allowed under the rent settlement. Furthermore, this followed the government's imposition of a 1% annual reduction of the social and affordable rents on the English SHP sector for four years from April 1, 2016.
We consider that frequent government intervention in the rent regime creates uncertainty for the sector. Furthermore, we see a risk that persistently high inflation may lead to additional limitations on rent increases. Positively, the government has announced a new five-year rent settlement applicable from April 1, 2026, generally permitting social housing rents to increase each year by CPI plus 1%. The proposal is under consultation.
Public Policy Mandate And Regulatory Framework
We view the public policy mandate for English SHPs as strong, reflecting their important role in providing affordable homes, meaning low-cost rental properties for which the rent is typically 50%-80% of the prevailing market rate in the region where the registered provider operates. We estimate that more than 4 million, or 16%, of all homes in England constitute affordable homes, and the waiting lists for affordable homes are extensive across the U.K., underpinning the importance of the SHPs in delivering affordable homes.
Registered providers typically emphasize their public policy purpose, supporting their tenants and providing community services. As nonprofit organizations, they reinvest all the surplus income they generate into more affordable housing. Some registered SHPs in England are developing homes for outright sale, thereby exposing themselves to the risks associated with real estate markets. We consider generating income from sales as riskier than generating income from traditional rental activities.
Moreover, we consider that since the Housing Act 1988, which allowed local authorities to transfer their housing stock to a registered provider, private finance has played an increasingly important part in funding the development of social housing properties. This has led to a steady increase in the sector's debt burden.
We consider that the sector benefits from solid ongoing oversight by the RSH, which is a nondepartmental public body that regulates private registered SHPs to promote a viable, efficient, and well-governed social housing sector. A registered SHP must submit a quarterly survey forecasting its liquidity position 12-18 months ahead. The RSH also carries out annual stability checks of registered SHPs' business plans and annual accounts, and undertakes periodic inspections to assess their financial strength, risk profile, quality of governance, and consumer standards. The RSH publishes regulatory judgements on all the registered SHPs that own or maintain more than 1,000 homes.
Forms Of Support And Negative Intervention
Financial support to the English social housing sector is less generous than in other parts of the U.K. and in an international context. This has reduced the English SHPs' financial viability in recent years. We also consider that the rent cuts and rent caps in recent years will constrain future years' revenue generation.
Generally, the government provides grant funding via Homes England--an executive nondepartmental public body sponsored by the Ministry of Housing, Communities, and Local Government--or the Greater London Authority (GLA). Grant rates in England are low compared with many other regions globally, typically amounting to 15%-20% of the development cost. This means that English SHPs fund more of their activities with external debt that needs ongoing servicing. Some providers have resorted to a cross-subsidizing model, whereby they develop homes for outright sale to support other social housing activities and development, thus exposing themselves to potential volatility in the real estate sector.
We consider it positive that the government recently introduced more flexible grant funding to develop new homes. We understand that grant funding may also become available for regeneration schemes. The sector also has more visibility on and easier access to grant funding from the Building Safety Fund and the Social Housing Decarbonization Fund, typically for investments in existing homes. We understand that Homes England and the GLA could allow providers to use its recycled capital grant fund for investments in existing stock, although use of this funding source has been fairly limited to date.
Finally, we consider it positive that about 50% of tenants receive state benefits, as this supports rent collection and the stability of the SHPs' main income stream.
That said, we consider that the U.K. government's prior negative intervention weighs on the regulatory framework for England. As part of welfare reforms that the government launched in 2015, English providers were required to reduce their affordable rents over a four-year period from April 1, 2016. This has had a cumulative impact on English SHPs in terms of lost rental revenues. We consider the possibility of government intervention in the rent standards to be a weakness in the regulatory framework.
More recently, the U.K. government imposed a 7% upper limit on the increase in social and affordable rents for the year to March 31, 2024, capped significantly below inflation. We understand there are ongoing discussions about potential rent-recovery mechanisms in future years. This could be positive for the sector, but we consider that there is a high degree of uncertainty around the nature of such mechanisms.
The government has announced a five-year rent settlement from March 31, 2026, that continues the CPI plus 1% rent increase. This remains under consultation.
Furthermore, we consider it negative for the sector's financial viability that in recent years the government has increased the requirements for the sector multiple times, including a push for more energy-efficient homes by 2030, enhanced fire and building safety standards, and an increased focus on tenants and consumer standards. While the government has provided more grant funding to the sector, we view it as inadequate and unlikely to materially ease the pressure on the SHPs' financial indicators.
Scotland
Major Factors
| Overview | |
|---|---|
| Key strengths | Key risks |
| Robust oversight by the Scottish housing regulator. | Ambitious development of new homes, albeit partly supported by sizable grant funding. |
| Limited evidence of negative government intervention, and maintenance of flexibility in rent-setting. | |
We consider that the regulatory framework for Scottish registered social landlords (RSLs) is very strong. The Scottish housing regulator (SHR) has solid oversight of the sector and maintains a relatively high level of interaction with the RSLs. The RSLs in Scotland receive significantly more support than in England, in the form of grant funding, which typically covers up to 50% of the development of new homes.
The sector maintains a high degree of flexibility in adjusting rental increases. RSLs have historically enjoyed the capacity to increase rents with minimal restrictions, although emergency legislation has inadvertently affected the sector in the past. We consider that the current discussions around rental caps focus on the private sector, and we therefore expect that RSLs will maintain their current level of freedom to increase rents. In combination with relatively high grant funding, this should alleviate some of the financial pressures on the RSLs.
Public Policy Mandate And Regulatory Framework
We consider that the Scottish government prioritizes its social housing policies and agendas, entailing strong political support for RSLs to increase the quantity and quality of the social housing stock in the region. Of all the regions in the U.K., Scotland has the highest share of its population residing in social housing, at nearly one-quarter of total dwellings. This, in our view, supports the sector's vital public service.
We view oversight as being very strong in Scotland, with a separate body, the SHR, tasked with regulating the sector. The SHR publishes an engagement plan for every RSL, raising its level of engagement if it assesses the RSL as systemically important.
As part of its tailored engagement plans, the SHR requires RSLs to provide forward-looking financial returns and annual assurance statements to confirm that they are meeting the regulatory standards. These include performance, financial viability, and governance, with an increased focus on tenant engagement and provision of services. Alongside its engagement plans, the SHR also carries out a risk assessment for RSLs each year and publishes their regulatory status based on their governance and financial management.
Forms Of Support And Negative Intervention
RSLs in Scotland receive ongoing systemic support in the form of grant funding to develop new affordable homes. They also have more flexibility to set rents than their English peers. Furthermore, grants to RSLs are significantly higher than in England, covering up to 50% of their capital spending on the development of affordable homes.
Following a moderate reduction in grants available from the Affordable Housing Supply Programme for fiscal 2025, the Scottish government increased grant availability for fiscal 2026, largely reversing the cut in the previous year. We therefore continue to assess that Scottish RSLs do not face the same pressure as English registered SHPs to seek cross-subsidies from riskier outright sales.
The sector continues to enjoy more flexibility over rent-setting than in England. That said, in fiscal 2023, the Scottish government passed emergency legislation stipulating a rent freeze and a moratorium on evictions by both public and private housing landlords until at least March 31, 2023. However, within a few weeks, and after extensive consultation with the sector, the social rent freeze was lifted and replaced with agreements from landlords to keep any rent increase for fiscal 2024 well below inflation. We consider this situation to be temporary due to exceptionally high inflation and expect that Scotland will maintain rent-setting flexibility.
We understand that the Energy Efficiency Standards for Social Housing post 2020 are being reevaluated in response to discussions around their cost-effectiveness and relative impact. Although the standards and the associated grants are not yet clear, we believe that there is potential for the government to provide appropriate funding to support RSLs in achieving the updated standards as it has a track record of supporting the sector.
Wales
Major Factors
| Overview | |
|---|---|
| Key strengths | Key risks |
| Direct oversight and close ties with the Welsh government. | More restrictive built-in limitations in the rent-setting formula than in other devolved regions. |
| High level of grants for both operating and capital spending. | Increased quality standards on top of ambitious development targets. |
We assess the regulatory framework for Welsh RSLs as very strong. The Welsh government has a strong focus on social housing, considering it to be a vital service to the population. The Welsh Housing and Regeneration Directorate, which sits within the Welsh government, works with providers to ensure adequate oversight and adherence to regulatory standards. We consider the relationship between the government and providers to be close and the government's prominent grant funding to the sector to reflect its prioritization of social housing.
Solid government funding should offset longer-term pressure. We consider that the track record of solid government funding--reflecting the Welsh government's strong focus on social housing and the affordability of new homes--will help offset pressure on the sector's financial indicators in the longer term. That said, some uncertainty remains around the RSLs' capacity to achieve ambitious development targets alongside robust standards for existing housing.
Public Policy Mandate And Regulatory Framework
Affordable housing remains a key agenda item for the Welsh government and Welsh RSLs play a central role in supporting government policies. In 2023-2024, Welsh RSLs delivered 75% of all new affordable housing in Wales. The sector holds 16% of the housing stock in Wales, with demand remaining robust.
We view oversight of the sector in Wales as very strong, with the regulatory function forming part of the government itself, within the housing regulation team. The regulatory model draws from and has parallels with the models in the other devolved regions and in England, with minor variations in approach, but it maintains a fundamental focus on governance and the financial viability of providers.
Welsh RSLs are required to provide detailed information to the Welsh government. The social housing sector in Wales is considerably smaller than in England and Scotland. This allows for closer engagement between the regulator and providers in a process known as coregulation. However, we consider regulatory scrutiny in England and Scotland to be more rigorous than in Wales.
We generally consider the framework in which Welsh RSLs operate as transparent. It includes a full regulatory assurance review roughly equivalent to the RSH's in-depth assessment in England. However, there have been delays in updating the regulatory judgements for some Welsh RSLs over the past year.
We understand that the Welsh government is planning updates to the assessment model that aim to make regulatory judgements clearer and more transparent. Despite the delays to the published judgements, we continue to consider that the Welsh government maintains a close relationship with RSLs.
Forms Of Support And Negative Intervention
The Welsh government's support for social housing is evident in its prominent grant funding to the sector. Compared to England, the Welsh government provides a substantial amount of grant funding to the social housing sector. On average, grants comprise over half of the development spending in Wales, limiting the need and appetite for sales to obtain cross-subsidies.
Over the past year, the regulator has moved from a fixed-grant model to a more variable, individual-based assessment to make development more financially viable while still containing the need for debt funding in the sector. Beyond support for development, the Welsh government also has a track record of providing operating grants for investments in existing homes.
Historically, negative intervention by the Welsh government has been limited, although we consider that the scope for rent increases is more restrictive than in other devolved regions in the U.K. The current five-year rent settlement has been extended until fiscal 2026 and allows for an increase of CPI plus 1%, providing that the CPI falls into the 0%-3% range. If the CPI falls outside this range, the Welsh ministers will decide on the annual rent increase.
Northern Ireland
Major Factors
| Overview | |
|---|---|
| Key strengths | Key risks |
| Solid grant funding to support the development of affordable homes across Northern Ireland. | Political uncertainty, which, if it recurred, could reduce clarity on long-term goals and planning. |
| Relative flexibility in rent-setting and a limited track record of negative intervention. | Slightly less rigorous oversight compared with other U.K. regions. |
We assess the regulatory framework in Northern Ireland as very strong. Our view of the regulatory framework reflects relatively solid oversight, although we consider that it is less rigorous than in other regions of the U.K. Registered housing associations (RHAs) in Northern Ireland receive ongoing systemic support in the form of freedom over rent-setting and grant funding for new development. This is because affordable housing is one of the most important aspects of policy in Northern Ireland, as evident from the high share of government spending devoted to affordable housing.
We think that political instability in Northern Ireland could add to the uncertainty around the future of the regulatory framework. The Northern Ireland Assembly was reinstated in February 2024. This followed two years of the U.K. government administering Northern Ireland after the power-sharing institution in Northern Ireland collapsed in February 2022. We are mindful that this situation has delayed decision-making and affected the social housing sector. We consider that if political instability was to recur, it could make long-term planning more difficult than in other parts of the U.K.
Public Policy Mandate And Regulatory Framework
Housing is one of the most important topics on political manifestos in Northern Ireland, as evident from the relatively high share of government spending devoted to housing. There are 20 RHAs in Northern Ireland managing more than 60,000 homes. The five largest RHAs own 50,000 homes, so it is a small and concentrated sector compared with other regions. The government, through the Department for Communities (DfC), has strong links with the RHAs and sets their regulatory and operating framework.
The DfC published a 15-year draft housing supply strategy for 2024-2039 in December 2024, addressing the strong demand for social housing and underpinning the strong support that the government provides to the sector. Furthermore, the Northern Ireland Executive, an administrative arm of the Northern Ireland Assembly, published a Program for Government on March 3, 2025, that lists the provision of more social, affordable, and sustainable housing as one of nine top priorities in the run-up to 2027. We consider that the RHAs play an important role in delivering these affordable homes.
However, political instability in Northern Ireland resulted in the collapse of the power-sharing institution in February 2022 and left the region without its own assembly or government for two years. We understand that this delayed decision-making and affected the social housing sector. We consider that if political instability recurred, it could make long-term planning more difficult than in other parts of the U.K.
In Northern Ireland, like in Wales, the government itself, through the DfC, regulates the sector, rather than a separate regulatory body. As a result of this, and the relatively small size of the sector, RHAs have close ties with the government. This allows for solid oversight of the sector, both on a formal and an informal basis.
The DfC requires RHAs to provide regulatory standards evaluations, annual returns, and financial and tenancy management information, as in the other U.K. regions. The DfC monitors, assesses, and reports on the RHAs' performance, financial well-being, standards of governance, and quality of the homes and services they provide to tenants.
The relatively high proportion of RHAs requires an enhanced level of engagement with the DfC. This supports our view that oversight of the sector is less proactive and rigorous than in other regions. The DfC assigns a regulatory rating to the RHAs, and where appropriate, increases its level of engagement with the RHAs to ensure that they meet the regulatory standards.
Two of the 20 RHAs in Northern Ireland did not meet the regulatory requirements in fiscal 2024 and are working to improve their position. Another two needed to improve in some areas in order to ensure continued compliance.
Forms Of Support And Negative Intervention
The government in Northern Ireland is supportive of the sector in that the RHAs have freedom over rent increases and receive ongoing systemic support in the form of grant funding for new development. Direct grants to RHAs for new development cover up to 50% of the capital expenditure for affordable homes. This reduces the need to fund development with debt or seek cross-subsidies from riskier activities, such as sales, which RHAs in Northern Ireland are prohibited from doing anyway.
While the social housing sector in Northern Ireland needs to meet the same standards as in other regions with regard to quality of homes and energy efficiency, no grant funding has been made available to support this.
We have not seen any direct negative intervention in the sector to the extent we have observed in England. We understand that the DfC has the statutory powers to broker or intervene in mergers within the sector, although such instances have been limited to date.
Related Criteria
- Criteria | Governments | General: Methodology For Rating Public And Nonprofit Social Housing Providers, June 1, 2021
Related Research
- United Kingdom, April 14, 2025
| Primary Credit Analysts: | Karin Erlander, London + 44 20 7176 3584; karin.erlander@spglobal.com |
| Matthew R Hyde, London +44 20 71760456; m.hyde@spglobal.com | |
| Colleen Sheridan, London +44-20-7176-0561; colleen.sheridan@spglobal.com | |
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