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Housing Associations’ Credit Ratings Downgraded

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Moody's has downgraded 29 housing associations in England for the second time since February following the conclusion of a review into ratings of the sector.

The original cut in rating was driven by the cut to the UK's national downgrade.

The result of the cut in ratings could lead an increase in the interest rates housing associations have to pay when they borrow money, and dent the confidence lenders have in the sector.

Ratings agency Moody’s says its decision to downgrade by one notch was driven by a downward reassessment of the "potential provision of extraordinary support".

The Home and Communities Agency's (HCA) recent issue of a discussion document on proposals to adjust the regulatory framework has led Moody's to more cautious in its assessment of the likelihood of effective government intervention.

This is a reflection of what Moody's views as "challenges in the ability of the regulator, the Homes and Communities Agency, to step in and protect these entities and their creditors in extreme situations".

Only one housing association escaped the downgrade, Affinity Sutton, which maintains its Aa3 rating.

Matthew Bailes, director of regulation at the HCA, said: “The regulator’s 2012 Global Accounts show that the sector is financially sound and continues to secure the finance it needs on competitive terms. The issues at Cosmopolitan have been successfully resolved with active involvement of the regulator. We will continue to take action if we have concerns about individual providers and we have started a discussion with the sector about effectively managing the issues around diversification.”

National Housing Federation finance policy leader, Joseph Carr, said: “This is an unfortunate but not unexpected development following the UK’s loss of its triple-A rating, worries around welfare reform and the problems surrounding regulation.

“But it does not paint a true picture of a sector. Housing associations raised almost £4 billion with bonds in 2012 and have continued to raise finance in that way this year. This shows that, despite misgivings of the rating agency, they are stable and robust businesses that continue to instil confidence in investors and attract finance at competitive rates.

“We’re confident that the sector will continue to display its financial strength over the next few months and show that it is one of a few safe bets in an uncertain economic climate.”

The report also indicates Universal Credit could lead to further cuts in ratings, stating that "increased implementation risks associated with the introduction of Universal Credit would result in negative pressure on the credit profiles of housing associations".

Gavin Smart, the Chartered Institute of Housing's director of policy and practice, added: “While any downgrading is undesirable it is important to recognise that housing associations remain an excellent investment proposition with a strong track record and that there is proven investor appetite for housing association debt. Even following these downgrades the overall ratings position of the sector remains strong."

I suppose increasing the cost of subsidised housing to tenants? Selling off assets?

Experts on here can elaborate I'm sure...

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I suppose increasing the cost of subsidised housing to tenants? Selling off assets?

Experts on here can elaborate I'm sure...

could be something to do with rent limits....this means the associations will have to cut costs to keep profits up.

Those £300K salaries might need reviewing.

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  • 239 Brexit, House prices and Summer 2020

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