BLOG: Annual report to residents 2019/20 – How do we use our money?

By Peter Benz, Executive Director of Finance

We've published our latest annual report for residents where you'll be able to find out how we did against our targets over the last financial year from April 2019 to March 2020.

Why do we publish these reports?

You may wonder why we publish our reports annually. This is one of the ways we provide residents with a wide range of information about our performance in a clear way. It also   keeps us legally compliant with the Regulator for Social Housing. It also gives us the opportunity to see what’s working and what can be improved.

The main reports we publish after the end of each financial year include:

• Annual Report and Financial Statements – our audited financial records showing our financial activities and performance for the year. The audit is undertaken by our external auditors, BDO.
• Value for Money Statements – our report showing how we achieved value for money when delivering our services and our objectives. It also includes information about how we performed compared to other housing associations in the G15 Group.
• Annual Report to Residents – our report for residents about how we performed against our targets as well as our achievements for the year.

Where does our money come from?

Network Homes is a not for profit housing association. We build, sell, rent and manage affordable homes across London and Hertfordshire. We currently own and/or manage nearly 21,000 homes.

All the proceeds from the rent and sale of these homes are invested into delivering our social purpose of building more affordable homes. The income from rents and sales also goes towards covering our direct business costs in terms of management and maintenance of our existing homes and debt servicing.

In addition, as part of the Government’s Affordable Homes Programme, we receive grant funding which helps us to build and deliver some of the new homes we provide for social and affordable rent, and shared ownership.

To try and reduce the potential impact of a more challenging financial environment we aim to operate as efficiently as we possibly can; we think about how we spend our money to add the most value for our customers; and we aim to limit the amount of money we have to borrow to build new homes.

So how do we use our money?

In 2019/20 we achieved a net surplus of £21.5m - a decrease of 70% from the previous year’s record £72m figure. (The reason for the exceptionally high figure in 2018/19 was because we sold a subsidiary of Network Homes that provided student accommodation.)

Every penny of the surplus we make each year is reinvested into the business. As a housing association, we do not have shareholders and we do not pay dividends. We use all our money to reinvest in our social objectives, delivering more homes, maintaining our existing ones and seeking to improve our services year on year.

We received most of our income from a range of sources:

• £144.4m - Social housing (rent, service charge and grants)
• £29.9m - Other social income including fees from agency contracts, supporting people contracts and sale of shared ownership properties
• £14.7m- Non-social income including rent from commercial properties, and market sale properties.

Your rent goes towards a variety of things including repairs and maintenance on your home, administration costs and paying interest on our loans. This year we spent over £53m of the rent money we received on housing management and administration (£32.3m) and repairs and maintenance (£21.1m). This is equivalent to nearly 50% of our total expenditure.

Good landlords invest for the future and for us this means building new homes and taking care of the homes we already own. Importantly, the money we use to do this doesn’t just come from the rent we receive, it’s also funded from private loans which need to be repaid, just like a mortgage. This year we spent £234.3m in new development activity, starting 590 new homes. Plus, we invested £16.3m in maintaining and improving the standard of our existing properties.

Here’s a broad overview showing how we used our cash last year:

Cash In – 2019/20 - £196.7m

Cash Out – 2019/20 - £175.5m

*Other social income includes fees from agency contracts, supporting people contracts and sale of shared ownership properties.

+ Non-social income includes rent from commercial properties, rent from student accommodation properties, and market sale properties.

Housing associations like Network Homes do more than build homes. We deliver services that help create social value such as providing money advice, offering apprenticeships and other employment and training opportunities. We also form valuable partnerships with other organisations, such as the one we have with the charity Hestia to provide safe accommodation for victims of modern slavery.

During these challenging and uncertain times, it’s now more important than ever we are in a strong financial position to continue to provide homes, services and support to those who need them the most.