Gambit is pleased to announce the publication of its Housing Association Market Review for winter 2020/21. The report examines the financial health of organisations and the impact of Covid-19 on the sector, including an assessment of the current funding landscape and the key considerations for organisations when reviewing current funding arrangements and/or securing new borrowing facilities.
To read the full report please click here.
Report summary:
- Housing Associations (HAs) have remained resilient throughout the Covid-19 pandemic, overcoming multiple sectoral challenges to ensure the continued delivery of vital services to those in need.
- The pandemic has created many operational challenges, including disruption to development projects, remote working and completing maintenance works whilst adhering to Covid-19 guidelines.
- Decarbonisation remains a key area of focus for the sector. Housing Associations will have to develop new low-carbon housing and/or increase investment in retro-fitting existing units to improve environmental standards.
- Housing development will be key to economic recovery and the preservation of jobs for the next 12 months and beyond. This provides opportunity for HAs to continually pursue housing development targets and further benefit those in need of affordable housing.
- The range of funding options is more than ever and lender appetite remains high for the sector; underpinned by strong operational governance, the asset backed nature of organisations and stability of earnings.
- Whilst short-term variable interest rates remain low, many HAs are locked into higher-priced fixed rate interest agreements entered into several years ago and a cost-benefit analysis of restructuring may be a consideration.
- Favourable interest rates will not remain indefinitely. Therefore, continued effective treasury management and comprehensive business plan stress-testing will help HAs manage their risk. Consideration should also be given to revisiting the number of covenants and simplifying restrictive covenants to increase operational flexibility.
- The indebtedness of the sector is rising and currently stands at £80bn in England and Wales. Around one third of this debt is variable, benchmarked to the London Inter-Bank Offered Rate (LIBOR).
- However, at the end of 2021, LIBOR in its existing form, will cease to exist and will be replaced by the Sterling Overnight Index Average (SONIA). Those with facilities expiring at the start of 2022 should seek advice from a trusted advisor to ensure the technicalities are understood and potential issues are addressed.
