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Housing Associations Face Selling Off Social Homes To Meet Interest Bill

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http://www.telegraph.co.uk/finance/newsbys...erest-bill.html

Fears are growing that housing associations will have to sell off thousands of social homes to meet the interest bill for their debts in the face of falling rental income and tumbling house prices.

Housing associations own half the 4.8m social homes in the UK and provide almost all the new build, but are facing a dramatic loss of income next year that could damage the provision of low-cost housing in Britain.

Under their charter, associations set rents that track retail price inflation each September. Last month RPI was -1.4pc and it is expected to drop to -2pc next month. At that level, the industry would lose an estimated £250m in rent.

According to the Tenant Services Authority (TSA), 59 housing associations are already entirely dependent on selling properties to cover their interest bills and 160 associations rely on sales for at least 25pc of their interest cover. The industry as a whole made a profit after tax of just £319m last year to reinvest in housing.

Although associations do develop property for sale as part of their revenue models, accountants say falling house prices and declining rent will jeopardise their financial position.

Clare Miller, executive director of risk and assurance at the TSA, said she had concerns about "a minority of housing associations' financial position... due to reduced rental and sale income". Indicating that they may be allowed to sell social housing stock and cut back on new housing provision, she said: "Their parameters and future commitments could change."

The TSA said the sector is already "planning asset sales including shared ownership units and right-to-buy properties of £1.4bn over the next 12 months, up from £1.1bn last quarter".

Housing associations receive half their funding from the state and half from a mixture of rental income, low-cost property development for sale, and bank loans. A spokesman for Communities & Local Government said: "We are consulting on proposals to protect any drop in rental income that is greater than 2pc. We need to make sure there is continued investment in affordable housing."

A crisis among the 1,600 housing associations in England would be a huge political issue because 5m people are waiting for social housing, according to the National Housing Federation. Last year, associations made a £577m profit from house sales. The TSA has conceded that "the level of sales which contribute to the surplus for many associations will abate in 2008/09 and beyond".

At the same time, profits will be eroded by impairments on the sector's £85bn of housing assets, which jumped from £1m in 2007 to £22m last year and are now expected to hit £174m this year.

Housing associations also took on an average of more than £15,000 debt per home for the first time in 2008, the TSA has reported.

This recovery just gets better and better.

So we have the banks holding onto repossessed houses to keep prices up, now they face housing associations dumping potentially tens of thousands of houses on the market.

I'm glad those at the top are thinking things through to the levels they have. If they hadn't we would be well and truly fooked. :blink:

Everything everywhere is a ticking timebomb.

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Scare story.

The Tenant Services Association will allow HAs to waive this reduction if there are likely to be serious financial consequences from putting it through. Like having a fire sale of housing stock.

This story is intended to prepare the ground for allowing many HAs not to put though the rent reduction, despite a near 6% increase last year.

I am sure Council Dweller will have a view on this!

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The industry as a whole made a profit after tax of just £319m last year to reinvest in housing.

You can see how hard it is to actually make a pound, rather than just print it. Why are they bothering to run it, just so they can pay loads of interest to the banks? What will the banks do, flatten them?

Scum.

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You can see how hard it is to actually make a pound, rather than just print it. Why are they bothering to run it, just so they can pay loads of interest to the banks? What will the banks do, flatten them?

Scum.

They were set up to give a big cash boost to councils.

You had all this housing run by councils. They then sold it to HAs who borrowed from the banks to fund the purchase.

The council housing is still there with the same tenants, but the councils get a big cash injection and the borrowing is all off the government balance sheet. Free money for the government. Sorted.

Now look to see what other assets councils have, set up "independent" companies to manage it, and sell them the assets. More free money!

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They could start by trimming the wage packets of the bosses of the Housing Associations - they have some of the highest wages in the non for profit sector. Huge salaries.

"Take housing associations, the non-profit bodies that house low-income tenants. Some £3.59 of every £1,000 collected in rents, housing benefit and the like goes to pay their chief executives, whose salaries average £102,000."

And that was in 2003!

http://www.guardian.co.uk/society/2003/sep...lement.politics

Highest paid CEO

£213k

David Bennett

Sanctuary housing association

A one-off relocation bonus of £65,000 on top of his £148,000 salary has sent Bennett to the top of the public sector pay league. He is one of three chief executives in our sample to break through the £200,000 barrier. The others were Tony Hall, of the Royal Opera House, on £205,000, making him the highest paid boss of a fundraising charity, and John Belcher, whose £202,000 means his pay has almost doubled in five years at sheltered housing provider Anchor Trust.

Edited by gruffydd

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Scare story.

I am sure Council Dweller will have a view on this!

No, I just agree with every word you say!

(btw, did you hear that we voted against 'transfer' to a housing association? 72% said no!)

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They were set up to give a big cash boost to councils.

You had all this housing run by councils. They then sold it to HAs who borrowed from the banks to fund the purchase.

The council housing is still there with the same tenants, but the councils get a big cash injection and the borrowing is all off the government balance sheet. Free money for the government. Sorted.

Now look to see what other assets councils have, set up "independent" companies to manage it, and sell them the assets. More free money!

You old cynic you.

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No, I just agree with every word you say!

(btw, did you hear that we voted against 'transfer' to a housing association? 72% said no!)

You old cynic you.

I've been a tad peed off by the wriggling of the NHF and HAs to avoid the expected rent cut. If you're happy to pass on RPI when it's positive then do the same when it's negative. That just seems fair to me. But a lot of overpaid chief execs aren't happy about having to clamp down on expenses. Maybe they should try the real world of the private sector!

Glad you got the result you wanted on the transfer. There are benefits in going with a HA but unless the state are picking up your rent and service charge you're better off staying with the council.

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I've noticed HA properties in auctions. I'd been wondering why this was.

The excuse used by HAs is that these houses would be too expensive to bring up to the government's 'decent homes standard.' Can't see it myself.....and yes there do seem to be a great many at auction.

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The excuse used by HAs is that these houses would be too expensive to bring up to the government's 'decent homes standard.' Can't see it myself.....and yes there do seem to be a great many at auction.

There has been huge blocks of HA properties at auctions over the last 12 months, a large number being in London.

There is a huge block of them further up from me and some were sold off approx 8 yrs ago, I think they are now owned by sanctuary. Always been a bone of contention, we are in a small private cul de sac some of whom have distant sea views.planning made some weird enforcements on these houses, so they did not interfere with anyone else's view. These flats were built later, have stupendous views all had sattelite tv prior to the digital switchover. They all have newer cars than us but they do have some awful neighbours!!!!!! :P

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