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English housing associations will be more successful at mitigating the financial impact of the social housing rent cut than their counterparts in France, which are facing similar government-imposed losses.
A comparative report by ratings agency Moody’s found that greater flexibility on spending and revenue generation means that English associations will lose just 5% of turnover on average, compared with 13% for French providers.
In 2016, the UK government enforced a 1% per annum rent reduction for four years for English housing associations.
The 2018 French budget saw a similar policy unveiled, with an immediate rent cut equivalent to 3.1% of 2016 turnover to be followed by a further reduction in 2020.
In France, the cuts are expected to see around €4bn (£3.5bn) taken off the cumulative income of housing associations. In England, that figure is expected to be around €1bn (£880m) over the same period, according to Moody’s.
The ratings agency found that English associations are likely to mitigate around 70% of lost income over the four years of the rent cuts. However, “lower expenditure flexibility” meant that French associations would be forced to absorb greater losses.
For example, in England almost a quarter of the revenue loss has been mitigated through job cuts, their French equivalents “are unlikely to follow suit because they have less payroll flexibility and a lower appetite for job cuts”.
The analysis also said that a move by the French Government to alleviate revenue loss by incentivising housing associations to sell 1% of their stock each year – around 40,000 homes – was “ambitious” and cited a similar scheme from 2007 that “met with little success”.
Jennifer Wong, vice president at Moody’s and author of the report, said: “French social housing providers face sharp and deep rent cuts that will lead to a significant reduction in their income by 2020.
“They have fewer ways to raise additional revenue and less flexibility to cut spending than their counterparts in England.”