Revision to the SORP (FRS 102): Update for social housing providers

The Housing Statement of Recommended Practice (SORP) 2026 has now been published on 13 April 2026 by the National Housing Federation, following consultation on the draft issued in October 2025.

The revised SORP reflects the Periodic Review 2024 amendments to FRS 102 and represents the most significant update to financial reporting for registered social housing providers since the previous SORP was issued in 2018.

The updated Housing SORP applies to accounting periods beginning on or after 1 January 2026, with early adoption permitted provided all aspects of the SORP are applied consistently. For many providers with a March year end, the first set of financial statements under the revised SORP will therefore be for the year ending 31 March 2027.

Key changes of FRS 102

As expected, the most significant changes arise from amendments to FRS 102, particularly in relation to revenue recognition and lease accounting. However, the SORP Working Party has also taken the opportunity to address a number of topical and sector‑specific accounting issues where inconsistent practice had developed.

Revenue recognition

The updated SORP aligns revenue recognition with the revised FRS 102 Section 23 – Revenue from Contracts with Customers, which adopts a five‑step model based on IFRS 15. Housing providers will be required to assess and apply this model to relevant income streams, including:

• service charge income
• property sales
• other contractual income streams

Rental income continues to be accounted for under the leasing requirements of FRS 102 rather than the revenue model, and grant income is treated as a non‑exchange transaction under FRS 102 Sections 24 and 34.

The Housing SORP provides worked examples for key income streams and additional guidance where judgement is required.

Lease accounting

One of the most impactful changes is the introduction of a new lease accounting model based on IFRS 16, reflected in FRS 102 Section 20. Under this approach, most leases will now be recognised on the balance sheet through the recognition of:

• a right‑of‑use asset, and
• a corresponding lease liability

Exemptions are available for short‑term leases and leases of low‑value assets. This change will result in increased reported assets and liabilities and may affect loan covenants, key performance indicators and stakeholder reporting.

The SORP includes additional sector‑specific guidance on issues such as peppercorn leases, non‑lease components (including service charges), shared ownership leases and lessor disclosures.

Our videos on revenue recognition and lease accounting, whilst we refer to the Charity SORP, are relevant to Housing Providers preparing for the updated Housing SORP.

Wider SORP updates and sector‑specific guidance

In addition to FRS 102‑driven changes, Housing SORP 2026 introduces clarification and updated guidance in a number of areas, including:

• asset capitalisation and component accounting
• regeneration schemes
• impairment of assets
• accounting for grants on stock transfers as contingent liabilities
• shared ownership and Right to Shared Ownership arrangements

The SORP also reflects broader issues affecting the sector, including building safety, sustainability and decarbonisation, with updated guidance designed to improve consistency and transparency in financial reporting.

The main impact on narrative reporting is that the requirement to prepare an Annual (Strategic) Report previously applied to those with 5000 units under management, but this has been reduced to now apply to those holding 1000 units.

What should housing providers be doing now?

Although the revised SORP is now published, many housing providers are still at an early stage in assessing its impact. Providers should be:

• reviewing lease arrangements to identify contracts that will be brought on balance sheet
• assessing income streams under the five‑step revenue model
• considering the potential impact on loan covenants and financing arrangements
• planning system, process and training changes required ahead of implementation

Early engagement with auditors, lenders and other stakeholders will be important to ensure a smooth transition.

If you would like to discuss how Housing SORP 2026 may affect your organisation, or would like support with impact assessments and implementation planning, please contact Lucy Hammond or Coral Curtis