Housing associations still at risk due to welfare reforms
A major rating agency has warned that welfare reforms are still posing a credit risk for housing associations despite their resilience in coping with the changes thus far.
Moody’s have issued a warning that says “the worst may lie ahead” for landlords when it comes to welfare reforms affecting their finances, reports Inside Housing.
Moody’s said that associations have proved resilient to welfare reforms, including the bedroom tax and benefit cap, to date. It said: “In general, arrears, voids and bad debts have been lower than projected in housing association business cases over the past two years.”
It is warning that universal credit is “the hardest hitting reform measure” which has yet to be fully implemented. It’s warned that the payment of benefit for housing costs to tenants “is likely to increase the risk of non-payment of underpayment of rent”.
Roshana Arasaratnam, Moody’s vice-president, said: “While housing associations [have] so far proved resilient to the shake-up in the welfare sector, the worst may still lie ahead. Bad debts and voids could undermine cash flows and potentially diminish operating margins if housing associations fail to correctly anticipate an increase in arrears.”
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