RSLs face rocky financial future, says regulator

8 Jan 09
Housing associations face heightened scrutiny from their new regulator amid growing fears about how they will cope with the recession

09 January 2009

By Neil Merrick

Housing associations face heightened scrutiny from their new regulator amid growing fears about how they will cope with the recession.

The Tenant Services Authority, which became operational at the beginning of December, expects to monitor the cashflow and lending operations of the 200 largest associations on at least a quarterly basis throughout 2009 — with some landlords being assessed monthly and even weekly.

Peter Marsh, the TSA's chief executive, said the outlook was bleak for many landlords. 'These are unprecedented times. I don't think that 2009 or 2010 are going to be easy years for housing associations,' he told Public Finance.

Last month, Marsh told the Commons communities and local government select committee that six registered social landlords were 'at risk' financially. Since then, he said, some had overcome immediate problems but the TSA would continue to keep a close watch.

The authority, which will eventually regulate local authority landlords as well as RSLs, is especially concerned about associations that signed agreements with banks to guard against future rises in interest rates and now — following the sudden fall in rates — are being asked to come up with large cash sums at short notice.

Other associations are likely to record significant 'write-downs' on the value of land banks they acquired when land prices were higher. Marsh warned this could mean RSLs find themselves 'in breach of covenants with lenders'.

He urged those affected to speak to the Homes and Communities Agency so that development schemes could be 'repackaged'.

The collapse of the housing market has hit RSLs that rely on the sale of low-cost ownership homes to cross-subsidise development and other schemes. Bob Wilson, assistant director at the National Housing Federation, said the HCA was helping to alleviate the situation by increasing the rate of grant it pays for new homes.

But he accused some banks of 'playing hardball' by seeking to drive up the cost of existing loans. 'They are renegotiating existing deals for any reason they can get their hands on,' he said.

PFjan2009

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