Universal credit won’t affect ratings
One of the leading credit rating agencies has moved to downplay fears that welfare reform measures could negatively affect investors’ confidence in housing associations.
Moody’s Investors Service, which currently rates 20 English housing associations, has said that the future payment of housing benefit direct to tenants through the universal credit, which is part of the government’s far-reaching welfare reform programme, will not alter the social housing sector’s credit rating.
In its report the agency said the risk to social landlords of increased arrears as a result of the changes was ‘manageable’.
The report said that the limited scope of the reform, which will apply only to tenants of working age, would mitigate potential risk, particularly among landlords with large care and support arms.
Other factors that Moody’s judged would help investors’ confidence included the possible introduction of government safeguards, such as a cap on arrears exposure, and the long lead time before the start of universal credit payments in October 2013.
The report added that Moody’s ‘expects the costs of universal credit to vary between housing associations’.
Of the 20 housing associations the agency rates, Moody’s assessed that five had a low-risk profile, based on the likely number of tenants affected by direct payments and the landlords’ track record in rent collection.
These were Circle, Hastoe, Radian, Saffron Housing Trust and Saxon Weald.
The remaining providers, including Places for People, Family Mosaic and London & Quadrant, were assessed as having a ‘manageable’ risk profile, meaning that there was no change to their creditworthiness.
Housing associations need to secure a rating before they can launch bonds. They have launched close to £2 billion worth of bonds so far this year, with the final total for the year expected to reach as much as £3 billion.