Scottish house builder puts rental housing schemes on hold

Aaron Morby 2 years ago
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Scottish house builder Springfield has put all future affordable housing and build to rent schemes on hold due to rising costs and the Scottish Government’s plan to freeze rents in the face of the cost of living crisis.

CEO Innes Smith calls temporary halt to build to rent and affordable housing projects in face of growing headwinds
CEO Innes Smith calls temporary halt to build to rent and affordable housing projects in face of growing headwinds

The decision to derisk the building pipeline and concentrate on private housing schemes was announced alongside otherwise upbeat end of year results for the group.

Both affordable and contract housing amount to around a third of total group revenues.

Scotland’s only stock market listed house builder said it had taken the pragmatic decision to temporarily pause entering into new large, long-term affordable contracts in order to protect its margins.

The firm said partly due to key subcontractors going out of business and delays resulting from finding replacement subcontractors, margins had been hit by delays and higher costs.

In particular, margin suffered from the delivery of two large, long-term contracts that had been signed in early 2020 based on expectations of lower material and labour costs.

Springfield said that it believed the longer-term fundamentals of affordable housing remained strong and the group expected to recommence signing contracts when more normal market conditions resumed and the Scottish Government’s next affordable housing investment benchmark review to reflect inflation has been conducted in November.

The house builder that its strategy to expand its PRS activity with developer Sigma had also been put on hold due to emergency legislation that is being introduced in Scotland to protect tenants by freezing rents and imposing a moratorium on evictions until at least 31 March 2023.

Innes Smith, Chief Executive Officer said: “This is a temporary measure designed to support families facing fuel poverty this winter, and Springfield continues to believe that the delivery of PRS housing offers a viable revenue stream in the longer term.

“Whilst this does not impact the Group’s existing agreement to deliver 75 PRS homes, any decisions on the expansion of this activity will wait until the policy environment is clearer.”

Despite building headwind for these parts of the business Springfield announced total comnpeletions up 27% to 1,242 in the year to May.

Revenue was ahead a fifth at £257m generating a pre-tax profit uplift of 10% to £20m.

 

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