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Housing associations to rack up £107bn in debt by 2023, S&P predicts

Investment in existing stock and development of new homes will drive up debt in the UK social housing sector to £107bn by 2023, credit ratings agency Standard & Poor’s (S&P) has predicted.

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S&P expects housing associations to borrow £20bn by 2023 (picture: Getty)
S&P expects housing associations to borrow £20bn by 2023 (picture: Getty)
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Investment in existing stock and development of new homes will drive up debt in the UK social housing sector, with registered providers’ debt expected to hit £107bn by 2023, says @SPGlobal #UKhousing

New analysis from the ratings agency predicted that social housing providers will build 130,000 new affordable homes over the next two years, raising £20bn in the process, for both capital expenditure and refinancing.

S&P also projected that registered providers will scale back their development of homes for sale due to narrowing margins and cross-subsidy models becoming less attractive.

The agency said: “We forecast that the UK social housing sector will build up debt over the next two years and faces a balancing act between investment in existing stock and development of new homes.

“Borrowing across the sector will rise accordingly, exceeding £20bn in FY2022-2023, including refinancing of more than £7bn of maturing debt. This will take the sector’s total debt at the end of FY2023 to over £107bn.”


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S&P said that 90% of this borrowing will be from English social housing providers that need to complete development programmes and invest in existing housing stock using a “low amount of government grants”.

English providers will be funded by £11.5bn through the Affordable Homes Programme, which will run between 2021 and 2026 and is expected to deliver up to 180,000 homes.

The agency suggested that capital markets will remain the main source of funding for housing associations in the next two years and highlighted the recent emergence of Euro Medium-Term Note programmes, which provide quick access to the capital markets.

S&P said there will be “increasing appetite to invest in the UK social housing sector” from international investors.

The analysis warned that rent arrears from the COVID-19 pandemic could offset income from planned rental increases, with English providers allowed to increase rent by Consumer Price Index plus 1% from 2021.

S&P said: “The central government’s fiscal response to the pandemic, such as the job retention scheme, has prevented a large peak in unemployment so far.

“Yet we expect that rent arrears will increase incrementally across the sector when the scheme ends, and this could result in a rise in bad debt and a loss of rental income for the SHPs.”

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