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Karbon Homes’ credit rating downgraded as North East expected to be badly hit by coronavirus
Ratings agency Standard & Poor’s (S&P) has downgraded North East association Karbon Homes’ credit rating from A+ to A with a ‘stable’ outlook, over concerns of an economic recession in the region.
The 30,000-home landlord will have limited financial flexibility compared with other housing associations to deal with the fall-out from the coronavirus outbreak, S&P said.
The ratings agency said: “We expect that the already limited economic dynamism of the North East will deteriorate further as a result of the COVID-19 outbreak, and will continue limiting Karbon Homes’ ability to boost its operational and financial performance.”
According to Public Health England, the North East has the highest COVID-19 death rate of all regions in England.
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S&P highlighted Karbon’s strength relating to its focus on low-income social housing, meaning revenue streams are more predictable, and suggested that the landlord will scale down its exposure to market sales.
However the agency said by operating in an area of “sluggish economic growth and high unemployment” the association is restricted in its flexibility and has seen an increase in arrears, estimated to remain above 6% for 2020.
S&P also noted that the landlord’s management team has “extensive experience” working in the social housing sector and views its financial policies as “prudent and strong”.
Scott Martin, executive director of resources at Karbon Homes, said: “Whilst we are naturally disappointed, we understand the external factors S&P has highlighted regarding the impact the coronavirus pandemic is having on the North East economy, our main area of operation.
“Our investors consider us an attractive prospect because of the strong demand for social housing in the North East and Yorkshire and we are well placed to support our communities in these challenging times.”
The association, which was formed in April 2017 via a merger of Isos Housing, Cestria Community Housing and Derwentside Homes, previously received an A+ rating with a ‘negative’ outlook.
