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S&P optimistic about housing associations' credit ratings

Tue 15 Sep 2015

A leading credit ratings agency believes many housing associations are likely to see further uplifts in their ratings.

According to Standard & Poor's (S&P), the government's recent decision to scrap the ten-year rent settlement was a "clearly credit negative" move.

However, in a briefing paper seen by Inside Housing, S&P said this gives the government a "strong incentive" to provide housing associations with "extraordinary support", rather than see them default as a result of "financial stress".

The agency therefore expects the majority of the housing associations it deals with to see credit rating uplifts in the near future.

S&P acknowledged that there are questions around the "predictability and stability of government policy" at the moment.

However, it stated that by having regulated housing associations in place, the government is better able to "control the housing benefit bill and protect the level of affordable housing" than it would if they "ceased to exist and were replaced by not-for-profit providers".

S&P went on to note that the credit ratings of a minority of housing associations are "already borderline in terms of credit metrics".

As a result, they could be "more vulnerable to downgrades" in the coming months, although it stressed a great deal will depend on the revised business strategies they are due to submit by the end of next month.

Patricia Umunna, a partner at Winckworth Sherwood Solicitors, commented: "This is a positive outlook for the future of RPs in the new world of rent caps which contrasts with the more gloomy reactions in the sector to the recent government announcements."

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