In a report published yesterday entitled ‘English Housing Associations 2017 Outlook: Adverse policy changes drive negative outlook’, Moody’s said the policy environment “remains challenging” for associations, with social rent income levelling off until April 2020 under the impact of the enforced rent reduction, driving them to greater dependence on sales receipts to fund development.

Cynthia Mar, an associate analyst at Moody’s Public Sector Europe, said: “We expect adverse policy changes to result in stagnant surpluses from social housing letting, while interest costs will continue to increase, driving a deterioration in the social housing letting interest coverage ratio for English Housing Associations from 2017.

“Under pressure from the government to build, but with diminished capital grant for their core product, we expect many HAs to accelerate market sales exposure in order to cross-subsidize social letting development. For the sector overall, funding for development will come mainly from expected sales receipts as of 2019. We expect those entities with more exposure to the commercial housing market to experience more cash flow volatility, a credit weakness in terms of interest coverage.”