Housing SORP is the accounting and financial reporting framework that governs how housing associations present their financial statements. If you’re a registered provider of social housing in England, your accounts need to follow Housing SORP. Here’s what it covers, why it matters for your financial reporting, and what your auditor should be checking.
What is Housing SORP?
SORP stands for Statement of Recommended Practice. The Housing SORP 2018 was issued by the National Housing Federation and sets out sector-specific accounting requirements for social housing providers. It sits on top of FRS 102 (the UK financial reporting standard) and adds extra rules for how housing associations should account for things like social housing properties, grant income, and component depreciation.
The current version – Housing SORP 2018 – was developed by the SORP working party, which includes representatives from the National Housing Federation, the Regulator of Social Housing, and the accountancy profession. It was last updated to reflect changes in FRS 102 and the RSH Accounting Direction.
Who does Housing SORP apply to?
Housing SORP applies to all registered providers of social housing that prepare accounts under UK GAAP (FRS 102). That includes:
- Housing associations registered as community benefit societies
- Housing associations registered as companies
- Housing associations registered as charities (where they don’t follow the Charities SORP instead)
- Local authority housing companies that are registered providers
If you’re registered with the RSH and your annual accounts are prepared under FRS 102, you should be following Housing SORP. Some larger groups with subsidiaries may also need to consider how Housing SORP applies at consolidated level. The SORP working party has issued consultation documents on potential future changes, so it’s worth keeping up with developments in housing accounting.
Key accounting requirements under Housing SORP
Housing SORP introduces several accounting requirements that go beyond standard FRS 102. These affect how you prepare your financial statements, what disclosures you include, and how your auditor tests compliance. The main areas where Housing SORP changes the accounting treatment:
Property classification and valuation
Social housing properties must be classified as either housing properties held for letting, shared ownership properties, or properties under construction. Each category has different recognition and measurement rules. Most social housing properties are held at cost less depreciation, though some associations choose to revalue. The standard valuation basis for social housing is Existing Use Value for Social Housing (EUV-SH) – not open market value.
Component accounting
Housing SORP requires associations to identify and account for major components of their properties separately. Roofs, kitchens, bathrooms, windows, heating systems and electrical installations each have different useful lives and must be depreciated individually. When a component is replaced, the old component’s carrying value is written off and the new one capitalised. This is one of the most complex areas of housing association accounting and a common source of audit adjustments.
Grant accounting
Social housing grant from Homes England (or the GLA in London) can be accounted for using either the accrual model or the performance model under the financial reporting standard FRS 102. Most housing associations use the accrual model, recognising grant as deferred income and releasing it over the life of the related property. Housing SORP gives specific guidance on grant accounting that goes beyond the general FRS 102 requirements. The treatment of grant on property disposals – particularly under the Recycled Capital Grant Fund – needs careful handling in the financial statements.
Service charges
Where housing associations charge tenants for services (heating, cleaning, grounds maintenance), SORP requires these to be accounted for separately with proper disclosure of the amounts recovered and the actual costs incurred. Variable service charges must include a sinking fund disclosure showing the balance held on behalf of tenants.
Housing SORP and your audit
Your auditor should be testing Housing SORP compliance as part of the annual audit. The FRC’s Practice Note 14 (revised March 2021) specifically addresses how auditors should approach housing association accounting and financial reporting, including the Housing SORP-specific areas above.
Common audit findings related to Housing SORP include:
- Component useful lives not reflecting actual replacement cycles
- Grant accounting inconsistencies between individual schemes
- Inadequate disclosure of related party transactions with group entities
- Service charge sinking fund balances not properly reconciled
- Development costs capitalised without meeting the recognition criteria
If your current auditor doesn’t have housing sector expertise, these issues can go undetected until the RSH raises them. An auditor who understands Housing SORP will catch them during fieldwork and help you fix them before the accounts are signed.
Getting Housing SORP right
Housing SORP accounting is more involved than standard FRS 102 financial reporting. The interaction between the statement of recommended practice, the RSH Accounting Direction, and the financial reporting standard means your finance team and auditor both need housing sector expertise. If your accounting policies haven’t been reviewed recently, or if you’re unsure whether your Housing SORP disclosures meet current requirements, a consultation with a specialist auditor can save time and avoid regulatory problems.
Audit Group acts as auditor for housing associations across England. We understand Housing SORP, FRC Practice Note 14, and the RSH regulatory framework. If you’d like to discuss your accounting or audit requirements, call us on 0161 832 4451 or get in touch.
