New analysis shows housing association borrowing on a steady upward trend, with associations likely to have a funding requirement of around £5.3bn for 2018 and about £8.6bn over 2019-2020.
Moody’s latest annual report of Europe’s funding needs shows constrained grant funding gnawing at the ‘growing appetite’ of associations for more homes.
As such, Moody’s says associations will require additional external borrowing in the future, with bond issues and private placements likely to account for a slightly smaller share of new funding over the next three years – at around 50% as bank loans become more competitive.
In November last year, Moody’s said the sector’s total debt will surpass £36bn over 2018 – but increased revenues would help hold the debt to revenue ratio steady.
But the report references the funding needs of UK local authorities as increasing, driven by capital spending.
According to the report, councils are likely to have a funding requirement of around £5.9bn in 2018 – almost double the figure from three years ago and increasing annually by around £700m 2019 and 2020.
The report acknowledges a higher reliance on locally-sourced revenue and lower government transfers as encouraging some councils to pursue revenue growth by borrowing to fund infrastructure projects designed to stimulate their local economies – and thus increase revenue from business rates.
The Public Works Loan Board is seen as still dominating lending to the local government sector, though councils may access the capital markets – potentially through the newly established UK Municipal Bonds Agency.