Association debt to exceed £80bn by 2019

In its first borrowing report for the UK social housing sector, S&P Global Ratings said that the average debt ratio to profit margin would reach 15 by 2019, compared with 12 in 2016.

Its projections showed that borrowing needs for registered social landlords would increase to £80bn between 2017 and 2019 – up from £74bn in 2016 – as favourable interest rates encourage associations to increase their borrowing to fund new development.

The agency said that rent cuts imposed since April 2016, combined with inflation-driven cost increases, were likely to put cash flow under pressure, although “the sector’s funding is likely to remain robust”.

S&P added: “We expect bank loans to continue as the main form of debt financing, while the capital markets will increasingly offer [registered social landlords] additional new funding.

“The sector’s significant undrawn facilities, continued access to European Investment Bank financing, and high cash balances will support the sector’s financial strength through 2019.”