Moody’s sees risk ahead for housing associations
0Housing associations in England had a positive 2012 financial year, according to ratings agency Moody’s Investors Service, but are subject to growing financial risks going forward.
In a sector comment the ratings agency said that housing associations it rates had three main challenges.
The introduction of universal credit welfare reform adds risks in collecting rent for a share of housing associations’ total rental income. Tenants are likely to continue to make payments on time however, because of the government’s efforts in limiting accumulation of arrears, said Moody’s.
The second increasing risk factor was the increased sales being made by housing associations along with increased non-core commercial activities. The associations are moving into these areas to compensate for a reduction in central grant, Moody’s noted, but as a form of income they are less stable than the usual rental activities, and more liable to fluctuation.
The third risk factor is housing associations’ increased exposure to market volatility from holding floating-rate debt and hedging positions. “Sudden increases in interest rates beyond levels assumed within … business plan[s] would exert pressure on ratings,” said Moody’s.
