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COVID-19 could reduce housing association market sale income by more than half, says Moody’s

Market sales exposure will be the most significant area of economic risk for UK housing associations in fiscal 2021 because of the coronavirus pandemic, according to analysis by credit ratings agency Moody’s.

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COVID-19 could reduce housing association market sales income by more than half, analysis finds #ukhousing

Coronavirus to cause “pronounced reduction in turnover, which will impact key metrics including operating performance, interest cover ratios and the debt burden”, says @MoodysAnalytics #ukhousing

Capital spending savings to offset market sales impact for housing associations, says Moody’s #ukhousing

A report by the agency revealed that the social housing sector could see a reduction in forecast market sales income of 55%, according to its ‘severe’ impact estimates. Its ‘baseline’ and ‘moderate’ estimates for lost market sales income are 30% and 40% respectively.

It said: “Housing associations with a high exposure to market sales will witness a pronounced reduction in turnover, which will impact key metrics including operating performance, interest cover ratios and the debt burden.”

Moody’s noted that associations with low exposure to market sales income will see a smaller impact on key financial metrics but are still exposed to operational challenges such as staffing shortfalls and higher rent arrears.

The report also noted that prior to the COVID-19 pandemic, housing associations were becoming more reliant on market sale proceeds.


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“In fiscal 2019, the median proportion of rated housing associations’ revenues from market sales was 14% and was set to increase to 19% in fiscal 2021 based on pre-outbreak business plans,” it said.

Moody’s highlighted nine associations that were forecast to make more than 30% of their turnover from market sales in 2021: Southern Housing Group, Newlon Housing Trust, Radian, Clarion, Moat Homes, L&Q, Yorkshire Housing, Poplar Harca and Orbit.

The report said that under ‘severe’ estimates, aggregate loss of income for these nine organisations could reach £830m or 21% of pre-outbreak turnover.

But the agency said some of these market sale declines will be offset by reductions in operating and capital spending because of the pandemic.

Under its baseline and moderate estimates, Moody’s predicts that cash savings would equate to £740m and £800m for these housing associations.

The report said: “The overall credit quality of the stressed housing associations will remain largely resilient, as we expect demand for social housing to continue to be high. Additionally, government support for the sector will remain strong given the importance of the sector’s social and economic role in the context of rising unemployment.”

Full responses to Moody’s report

Vimal Gaglani, director of treasury and financial planning, Radian Group: “The figures referred to are from the plans which were in place at a time when Radian and Yarlington were formalising our partnership.

“We regularly review our development programme, along with our business plan, including our tenure mix and market sales exposure.

“We are also closely monitoring our external operating environment and the impact it may have on us as a housing provider and are confident that our plans will mitigate the foreseeable risks ahead.”


Jonathan Wallbank, group finance director, Orbit: “We are confident that our robust governance framework, liquidity and the strength of our business give us the financial resilience we need in these uncertain times to deliver our strategy and continue to provide much-needed affordable homes.”


Mark Hattersley, chief financial officer, Clarion Housing Group: “We built a record number of homes last year to meet the needs of a range of groups failed by the market.

“As is the case with many fellow larger housing associations working hard to combat the housing crisis, this includes some increased exposure to market sales.

“We maintain a balanced development programme across a large geographical spread which is underpinned with our strong liquidity position.

“We are therefore well placed to manage the impacts of COVID-19 and ensure we continue to support those in housing need.

“These fundamentals were recognised in last week’s Standard & Poor’s report which reaffirmed our A rating, recognising the group’s capacity to fund investments and service debt obligations in these unprecedented times.”


A spokesperson for Newlon Housing Trust: “At Newlon we have stress-tested our business plan under various adverse scenarios and re-tested it following the outbreak of coronavirus.

“The plan, which is supported by strong liquidity, continues to demonstrate our resilience. In addition, we have clear mitigation plans and mechanisms for knowing when to trigger them.

“To date, our experience of housing sales activity over the past few months shows that the actual reduction in values is much less severe than we have assumed in our budget and business plan.

“Similarly, delays in sales are far less than we have planned for. We will continue to update and stress-test the plan and take remedial measures as appropriate.”


Barry Nethercott, director of finance at Yorkshire Housing: “We operate across a defined geographic area and our market sale properties are located within the areas of highest demand. COVID-19 has not changed our strategy to build a mixed portfolio of homes to help alleviate the housing crisis that exists and is arguably even worse post lockdown than before.

“New buyer interest for our homes remained high during lockdown and is currently running significantly above pre-lockdown levels. We are seeing sales successfully completing again with no reduction in price and very low levels of withdrawal. These combined factors have maintained our confidence levels in the short term.

“We remain mindful of the potential longer-term economic impact resulting from COVID-19, and our latest forecast for 2021 and future years business plan have market sales peaking at around 25%. This is also reflected in our extensive stress-testing.

“Through ensuring we maintain liquidity capacity to fund investments and the financial strength to service debt obligations, together with mitigating actions and triggers, we are confident our stress-tested business plan remains resilient to any changes in the housing market or wider economy.”

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