You are viewing 1 of your 1 free articles
Private sales ‘transformation’ drives credit rating drop for housing associations, S&P warns
The shift to “riskier market-based activities” has led to a fall in the average credit rating of England’s social housing providers, credit rating agency Standard & Poor’s (S&P) has said.
In a report published today, S&P said that 20 of the UK social housing providers it rated in March 2015 have seen their standalone credit profiles fall from ‘A+’ to ‘A-’ since then.
It said this was largely due to the fact that housing associations in England are increasingly turning to the capital markets and cross-subsidy model – in which the building of social housing developments is financed by the sale of market-rate homes – in the absence of government funding.
READ MORE
The agency warned that exposure to sales activities limits the visibility and predictability of future profits, therefore increasing housing associations’ risk profiles as they become exposed to higher competition and the cyclical nature of the residential property development sector.
Last year Inside Housing reported that S&P had downgraded the credit ratings of five large housing associations – L&Q, Metropolitan, Hyde, Notting Hill Genesis and The Guinness Partnership – due to an increase in their market exposure.
Since then, the cross-subsidy model has been brought under the microscope after a number of large housing associations took a hit to their private sales. This includes London’s largest landlord L&Q, which announced in February that it would be cutting its surplus in half, in part because of a downturn in the property market.
The report said that while market-based activities remain largely an English phenomenon, housing associations in the devolved nations of the UK are slowly starting to increase their borrowings and market activities.
The report cited large Scottish housing association Wheatley as one social housing provider that has raised external finance on the capital market.
