Latest quarterly survey published
The social housing sector remains in a strong financial position with access to sufficient finance, according to the latest quarterly survey published by the Homes and Communities agency today (1 July 2015). The sector remains attractive to lenders, with significant amounts of cash available to registered providers to cover their development and operating costs.
The regulator monitors and reports on the financial health of the sector as part of a robust approach to protecting social housing assets and helping ensure providers’ contribution to new housing supply.
The 2014/15 Q4 survey (January to March) reports that the sector has access to sufficient finance, with £12.5 billion in undrawn facilities and £4.8 billion held in cash. The vast majority of providers (95% of providers, December: 93%) anticipate that debt facilities are sufficient for more than 12 months. Over £4 billion cash is available with 32% of this being held by 14 providers who each report over £75 million available. Most of the sector’s forecast debt requirement over the next 2 years is to fund development programmes.
Figures from the survey demonstrate continued investor confidence in the sector. New facilities arranged in the quarter totalled £2.3 billion (December: £1.7 billion) of which 56% came from the capital markets and 43% from banks. New facilities of £6.8 billion were raised in the year: 60% came from capital markets and 40% from banks.
However, challenges remain and providers must balance the risks of ensuring the availability of funds against the risk and costs of holding surplus cash, while managing the uncertain timing of sales receipts in cashflow planning.
Jonathan Walters, Deputy Director of Regulation at the HCA, said
We continue to monitor the sector’s financial health, and that of individual providers, closely and overall, the sector remains financially strong. Income collection data suggests that the sector is continuing to manage the impact reform with most providers currently outperforming their business plans. The regulator will continue to monitor income collection as universal credit is rolled out.
For the 47 providers making use of free standing financial derivatives to hedge variable rate debt, mark-to-market exposure increased during the quarter. We are actively engaging with these providers to seek assurance that they are managing the associated risks, and that in particular they will be able to meet potential additional cash calls.
The regulator’s message remains that the sector is increasingly complex and providers must have a firm grip on the risks they face, with appropriate management strategies in place to mitigate those risks. Individual providers and their boards also need to balance the risks of ensuring the availability of funds against the risks and costs of holding surplus cash.
The regulator’s quarterly survey is one of the ways in which it gains assurance of the sector’s financial strength and the continued viability of individual providers. Its findings are based on the responses of 253 providers that own or manage more than 1,000 homes.
Other key highlights from the Q4 survey include:
- there was an upturn in affordable home ownership sales with 2,401 sales reported in the quarter. The stock of unsold homes increased to 4,999
- there were 4,286 affordable home ownership completions in the current quarter; bringing the total completions for 2014/15 to 10,565
- market sales data recorded 645 sales. There were 788 homes developed for market sale in the quarter
- income collection date appears relatively stable and remains within business plan for the majority (91% of providers)