UK Housing Associations: Return to Net Deterioration

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With warnings that inflation could exceed 20% by the start of next year, plans to introduce a tighter rent cap for tenants in the social rented sector are being discussed, to try help insulate some of the most vulnerable from the current cost of living crisis. However, this rent cap could negatively impact housing associations and affect their ability to maintain and improve existing residents’ homes and deliver more new affordable housing.

Figure 1 shows the Credit Consensus Indicators1 (CCIs) for UK Housing Associations.

Detailed consensus credit data is available on Bloomberg or via the CB Web App, covering many otherwise unrated companies. To arrange a demo of all single name and aggregate data detailed in this report, please request this by sending us an email.

Figure 1: Credit Consensus Indicators (CCIs), UK Housing Associations: Jan-20 to Aug-22

More CCI industry graphs can be found within Credit Benchmark’s monthly CCI Monitors.

After a run of months of net deterioration in 2020, this sample of more than 400 UK Housing Associations started to consistently record months with a CCI above 50 late last year through to early this year (Nov-21 to Mar-22). However, in more recent months credit movement in UK Housing Associations has been returning to net deterioration, with CCIs below 50 recorded in the last 2 months.

The deterioration of UK Housing Associations is mirrored in Figure 2, showing a long incline in average credit risk – measured by default probability (axis inverted).

Figure 2: Credit Trend, UK Housing Associations; Aug-20 to Aug-22

UK Housing Associations Credit Trend graph can be found on the Credit Benchmark Web Application, as a fixed list aggregate.

Figure 3 shows the credit distribution for this sample two years ago compared to current estimates.

Figure 3: Credit Distribution, UK Housing Associations; Aug-20 vs Aug-22

While more than 85% of UK Housing Associations are still investment grade, the credit distribution has shifted to the right over the past two years. There has been a significant decrease in entities with an aa credit category rating, and an increase in the a, bbb and bb.

Figures 4-6 show detailed credit trends for various individual UK Housing Associations, some of which have limited CRA coverage.

Figure 4: Longhurst Group LTD

Figure 5: Bedfordshire Pilgrims Housing Association LTD

Figure 6: Estuary Housing Association LTD

[1] The CCI is an index of forward-looking credit opinions based on the consensus views of over 20,000 credit analysts at 40+ of the world’s leading financial institutions.

Drawn from more than 950,000 contributed credit observations, the CCI tracks the total number of upgrades and downgrades made each month by credit analysts to chart the long-term trend in analyst sentiment. A monthly CCI score of 50 indicates neutral credit quality, with an equal number of upgrades and downgrades made over the course of a month. Scores above 50 indicate that credit quality is improving. Scores below 50 indicate that credit quality is deteriorating.

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    Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.