HCA probes landlords over market risk

In the wake of the European Union referendum and resulting predictions of a fall in house prices, the Homes and Communities Agency (HCA) is seeking assurances from landlords that they can manage their exposure.

Jonathan Walters, deputy director of strategy and performance at the HCA, told Inside Housing that the regulator was speaking to a “small number of associations” that would have large cash shortfalls if they experienced a drop in sales. The HCA idenitifed these landlords by looking at data returns.

Mr Walters said: “We’ve looked at those associations that have significant sales exposure or refinancing needs, and then we’ve looked at what happens if they don’t make the sales or they can’t make the refinancing that they expected, and who has particularly got cash shortfalls.”

The regulator is asking for additional information from these landlords about how they manage and mitigate exposures, and how their boards are providing oversight.

In the global accounts earlier this year, the HCA warned associations should have “mitigation strategies” in place to cope with a market downturn. The accounts revealed substantial growth in the associations’ surplus from for-sale activity, from £324m in 2014 to £501m in 2014/15.

Following the Brexit vote last month, Adam Challis, head of residential research at JLL, predicted a “modest down-tick in prices”, while PWC this week predicted house price growth will slow to 1% in 2017.

Steve Douglas, partner at Altair, said: “The most vulnerable are those that are still getting to grips with minus 1% [rent reduction], haven’t done their detailed stress testing, have made optimistic assumptions and have ramped up their sales programmes.”