The Regulator’s annual review of audited financial statements shows that, at an aggregate level, income grew faster than expenditure, helping to lift operating surpluses and improve key financial indicators. However, the report stresses that performance remains uneven, with some landlords already feeling the strain of rising costs, heavy investment commitments and declining cash reserves.

Sector turnover rose by 9.7% to £2.31 billion, driven largely by a 10% increase in affordable lettings income. Affordable letting activities, which generated £2.04bn, continued to dominate the sector’s financial profile, accounting for 88.5% of total revenue.

Gross rent and service charge income increased by 7.2% to £1.78bn, while operating costs rose by 4.8% to £1.84bn. Both planned and reactive maintenance spending increased, reflecting ongoing investment in stock quality and tenant safety.

These trends contributed to a 36.7% rise in aggregate operating surplus, reaching £498.2m after exceptional items. Affordable lettings surplus also grew strongly, up 31.8% to £453m.

The sector’s aggregate EBITDA MRI interest cover improved to 237%, up from 199% the previous year, marking a recovery from its recent low point. On an EBITDA‑only basis, interest cover rose to 358%.

Despite these improvements, cash balances fell for the fourth consecutive year, down 3.3% to £662.3m. The Regulator notes that while cash generated from operations increased by almost 20%, ongoing investment demands continue to erode reserves.

RSLs spent a record £1.004bn on management and maintenance in 2024/25, with the average cost per unit rising 5.8% to £3,138.

Net housing assets increased by 3.1% to £17.04bn, supported by continued investment in existing stock.

Key rent and lettings indicators improved across the year:

• voids reduced to 1.4%, though still above pre‑pandemic levels
• bad debts fell to 0.6%
• net arrears dropped to 2.4%, the lowest since 2014/15
• average rent increases exceeded both CPI and RPI after three years of restraint

The Regulator warned that RSLs continue to operate in a volatile economic environment. Although inflation has eased, it remains above the Bank of England’s 2% target, and the latest conflict in the Middle East is expected to push energy and supply‑chain costs higher.

Construction inflation, labour shortages and supply‑chain disruption have persisted into 2025/26, prompting many landlords to scale back or re‑profile development plans. Unanticipated building safety costs, including cladding assessment and remediation, are adding further pressure.

The Scottish Government’s Housing Emergency Action Plan, announced in September 2025, commits up to £4.9 billion over four years to boost affordable housing supply. The investment aims to deliver around 36,000 affordable homes by 2030.

Shaun Keenan, assistant director of financial regulation, said the sector remains resilient overall but warned that pressures are intensifying for some organisations.

“Our 2023/24 analysis showed that RSL finances were becoming increasingly constrained,” he said. “Our latest analysis indicates that RSLs remain financially resilient, but continuing declines in cash reserves highlight the pressure of rising costs and ongoing investment demands.”

Shaun added: “Overall RSL performance improved in 2024/25 as income grew faster than expenditure and liquidity benefited from new and expanded lender commitments.

“Performance, however, is uneven. Some RSLs are experiencing cash and short‑term liquidity pressures due to weaker operating results and high investment requirements, and financially weaker RSLs remain more exposed despite strong affordable lettings income.

“Given these pressures, it is vital that RSLs keep business plans under regular review. Strong resource management, effective scenario planning, and clear decision‑making will be key to maintaining financial stability while protecting affordability for tenants.”