The annual analysis of audited financial statements reveals that while overall liquidity remains robust, and RSLs have secured necessary funding for investment in both new and existing homes, their financial headroom is shrinking.

It shows that the weaker financial performance and record investment levels have impacted RSLs’ cash and cash equivalents which have decreased for a third year in a row to £685 million.

Shaun Keenan, assistant director of financial regulation, said: “RSLs have been navigating one of the most challenging environments in recent history. The difficult economic and operational conditions have constrained the finances of RSLs during 2023/24.

“RSLs faced higher debt costs due to rising interest rates, while simultaneously making record investments in existing homes. As a result, their operating costs have risen faster than turnover, resulting in a decline in the underlying surplus and reducing financial headroom for RSLs.”

Mr Keenan continued: “The challenges facing RSLs are set to continue. These include high interest rates, rising costs, market volatility and resource and labour challenges stemming from geo-political instability.

“RSLs are also facing increasing demands around housing quality and decarbonisation, all whilst working to continue to deliver homes and services for new and existing tenants and service users at a price they can afford.

“RSLs will need to continue to adjust their business plans to respond to further potential uncertainty and changing circumstances, effectively manage their resources to maintain their financial stability, and ensure that rents stay affordable for tenants.”