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Housing associations are looking to strike more partnership and joint venture deals as the sector’s borrowing headroom decreases, experts have noted.
Robert Grundy, head of housing at Savills, told Inside Housing that gearing levels – a measure of a company’s debt levels compared to its equity capital – are high across the sector, and that many housing associations are responding with joint ventures.
Associations have responded to a decrease in government grant over the past few years by leaning more heavily on borrowing.
Jeanne Harrison, vice president and senior analyst at ratings agency Moody’s Investors Service, told Inside Housing that “compared to more commercial organisations, [associations] are more heavily indebted”.
Moody’s predicts that its portfolio of associations will increase their borrowing levels by £3bn over the next two years.
Mr Grundy added: “What we’re beginning to see, I believe, is the point where people can see when they’re reaching or beginning to get to the point where they need to look at other forms of funding.
“In that context, what we’ll begin to see are more partnerships or joint ventures or whatever else you want to call them, where housing associations and local authorities with their council-owned companies could form structures which give an opportunity for private equity to invest alongside housing associations in the creation of new property.”
Larry Gold, deputy chief executive and chief financial officer at Trafford Housing Trust, which is part of a joint venture with L&Q to build homes in the North of England, agreed that there was more interest in joint ventures across the sector and said housing associations were becoming more co-operative.
He added that more and more associations were coming to him for advice about setting up their own partnerships.