Housing SORP 2026 Key Changes

Accounting Changes for Registered Providers of Social Housing

Introduction

The updated Housing SORP, which was issued in April 2026, reflects the significant changes to lease accounting and income recognition as set out in the updated Financial Reporting Standard (FRS) 102. It also provides guidance on a number of matters which had been subject to previous consultations. The updated Housing SORP applies to accounting periods commencing on or after 1^st January 2026.

This briefing paper does not cover the new lease accounting regime or the new income recognition 5 step model in any detail. Separate briefing papers cover these topics. This paper focuses on the specific key changes affecting the housing sector following the issuing of the Housing SORP.

Revenue Recognition

Accounting for rental income

As the lessor, the Housing Association will normally account for rental income as operating lease income. The only exception to this would be where the housing association is itself leasing the property and its sublease to the tenant covers the same period as its own lease, with the result that it meets the criteria of a finance lease. This would, however, be exceptional (para. 8.18).

As an operating lease, rental income should be recognised on a straight line basis which is in line with the existing accounting treatment (para.10.6). The SORP now includes a specific provision requiring an accrual or prepayment where the weekly collection does not coincide with the year-end date (para. 10.8).

Disclosure of lease payments receivable (as lessor) in the notes to the accounts

Under FRS 102, future lessor receipts must be disclosed in a note to the accounts, detailed between each of the next 5 years and then subsequent years in total. The SORP requires that housing associations should set out their assumptions in providing this disclosure. An example of the disclosure is provided in the SORP which indicates that current non-cancellable lease terms of existing tenants should be disregarded on the basis that this period is likely to be extended and, in the event of a change in tenant, a replacement would normally be found with a minimum void period. It also indicates that a period of 30 years would be a reasonable period over which to project rental income and that the effect of inflation should also be taken into account (para 8.22).

Accounting for service charge Income

Where they are variable, service charges are a separate component from rental income and income recognition should therefore be considered separately. On the other hand, where they are fixed, which is often the case for some affordable rental contracts, the service charge can be considered to be part of the rent for revenue recognition purposes (paras. 10.9 to 10.12).

Normally the services provided in return for the variable service charge are a bundle of services received over time. The service charge receivable in a period is equal to the cost of those services plus agreed management costs (paras. 10.9 to 10.12). The SORP specifically states that any service charge collected in excess of the actual or estimated costs should be accounted for as a receipt in advance and any service charge under-collected should be accounted for as an accrual (unless it is not normal practice to recover these amounts from the tenant) (paras. 10.13 and 10.15).

Sinking Fund amounts collected for tenants should be accounted for as deferred income until such time as the expenditure, for which the sinking fund has been set up, has been incurred (para. 10.14).

Accounting for property sales

Non-refundable deposits received on a property sale should not be recognised until the property has been sold. In the interim they should be accounted for as deferred income (para. 10.21).

Accounting for grant income

No change

Shared Ownership sales

No change to existing policy. The first tranche sale continues to be a revenue sale and subsequent tranches continue to be fixed asset disposals.

Leased Assets

Application of FRS 102

Where there are options in FRS 102, the SORP requires a particular accounting treatment, as follows:

a) Low value leased assets and assets with a life of less than 12 months must not be capitalised as right of use leased assets (para. 8.7).

b) Right of use leased assets must not be disclosed as a separate category of asset on the Balance Sheet. The analysis between leased assets and owned assets must be made in the notes to the accounts (para. 8.6).

Management agreements between housing associations

Where a housing association enters into a management agreement whereby it manages properties on behalf of another housing association, which owns the properties, the agreement may meet the definition of a lease contract. The extent to which the managing housing association assumes the principal risks and rewards of the properties will determine whether it is a management contract or a lease contract. Where the managing housing association pays a fixed fee to the housing association which owns the properties and is responsible for any voids and/or bad debts which arise on the properties, this would be an indication of a lease contract. (para. 8.5 and also paras.10.17 – 10.19).

Contingent Liabilities: Grants

The contingent liability note should include the total amount of grant potentially repayable if the grant funded properties were to be sold or used for a non-social housing purpose (para. 11.32).

Fixed Asset Properties

Regeneration Schemes

a) Where a decision has been made to regenerate a scheme which will result in the demolition of existing properties, those properties should be depreciated over their remaining lives which will be from the point the decision is taken to the expected date of demolition. This will ensure that the loss is disclosed as extra depreciation and not as a loss on disposal which should be beneficial in the calculation of loan covenant compliance as depreciation is usually excluded from the surplus calculation whereas losses on disposal are not usually excluded (para. 6.64).

b) Where the regeneration arrangements result in an exchange of assets with a developer, so that land and existing properties are transferred to the developer and new properties are received back in return, the land element of the exchange transaction should not be derecognised until the new properties and land are received (para. 6.73).

Impairment considerations in relation to sale intentions and obligations

Where a tenant (including a shared ownership tenant) has a right to buy or a right to acquire their property at a set value, the sale price should be compared to the NBV of the property to consider impairment (para. 12.7).

The intention to dispose of a property, in advance of original intentions, has been included as an additional indicator of impairment (para. 12.6).

Provisions to meet building regulatory requirements

Where there is a present legal or constructive obligation to carry out works to a property to meet regulatory requirements, and these costs cannot be passed onto the tenant, a provision should be made for the estimated costs. These costs could include building safety regulations, decarbonisation requirements or compliance with the decent homes standard (paras 9.10 to 9.11).

Capitalisation of building works to comply with building regulations

Incidental costs such as temporary accommodation for tenants or a safety walking watch should always be written off (para. 6.31).

In considering whether costs can be capitalised an additional criteria has been added. The previous three criteria were where the works:

Increased rental revenue
Reduced future maintenance costs
Extended the life of the building

The additional criteria is where the works:

Provide increased environmental benefits (such as decarbonisation) which accords with the social purpose objectives of the housing association (para. 6.26).

Classification of properties where tenants have right to shared ownership

Under recent legislation, some tenants have a right to convert their tenancy to a shared ownership arrangement. These properties should continue to be classified in accordance with the original intention of the housing association. Therefore, if the housing association intended the properties to be general needs properties, they should be classified as such, notwithstanding the tenants’ rights (para. 6.60).

Property Transfers between Housing Associations

There are no changes to existing accounting rules. The proposal in the consultation document to gross up properties for the grant and to bring the grant onto the balance sheet has not been reflected in the final version of the SORP.

Narrative Reporting

The Strategic Report has been renamed the Annual Report of the Board and it now applies to all housing associations with more than 1000 units. Previously the threshold was 5,000 units (para. 4.3).