HAs double the capital raised through bonds and investment

The Homes and Communities Agency’s quarterly survey of registered providers, published today, reveals £3.8 billion was raised by housing associations through public bonds and private placements in 2012/13 compared to just £1.5 billion in 2011/12. Bond activity accounted for 70 per cent of new finance in the sector. ‘Traditional’ bank funding amounted to 28 per cent of new debt, at £1.5 billion, although it still accounts for 83 per cent of the sector’s £68.4 billion of existing facilities.

The survey, which compiles information from all 274 English providers with more than 1,000 homes, said the spread over gilt – the difference between the interest rate on association bonds compared to ‘risk-free’ government bonds – fell from between 1.7 and 2.5 per cent in the first quarter of 2012/13 to 1.1 per cent to 2 per cent in the last quarter of 2012/13.

It said: ‘The main driver for the fall in credit spread appears to be increased demand for social housing bonds.

‘The sector has a strong credit rating and issues secured long-term bonds which… operate within a regulated market.’

However the HCA also warned: ‘As more providers access the capital markets and seek alternative sources of funding, it is important that they understand and manage the risks inherent in different forms of debt.’

Credit ratings agency Moody’s recently downgraded 29 of the 30 housing associations it rates, citing concerns about proposals for tougher regulation of the sector. However lenders suggested this would have no impact on the cost of borrowing for housing associations, as the market had already taken account of the factors that led to the downgrade.