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Housing associations will borrow extra £17bn by 2021, says S&P
Housing associations will borrow £17bn of new debt by 2021 as they accelerate development to meet demand for new housing, a report from a credit ratings agency has said.
Standard & Poor’s (S&P) said investment in housebuilding should grow over the next two to three years, boosted by new government grant funding and an increase in homes for sale.
As a result, borrowing from UK social housing providers will increase rapidly by almost 7% a year between now and 2021 to help fund these projects. In contrast, borrowing grew by around 4% between 2017 and 2018.
Housing associations will develop around 54,000 new social homes on average per year during 2019, 2020 and 2021, compared with 50,000 in 2018, S&P estimated. This is in spite of an expected increase in costs and rent cuts, which could put pressure on some organisations’ finances.
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English housing associations, which account for 90% of the UK social housing sector’s total debt, will have higher borrowing needs due to lower self-financing capacity and grants, S&P said.
The report said that S&P expected the capital markets to remain the primary source of funding for social landlords, and that private placements would become increasingly common.
“Despite the growth we project in registered social landlords’ debt, we anticipate that debt servicing will remain resilient,” S&P said.
Last week, chancellor Philip Hammond announced the return of guaranteed debt for affordable housing. The programme previously enabled housing associations to borrow at low rates.
