New Right-To-Buy Could Add To Housing Provider Challenges

The Conservative Party's announcement that it would offer 1.3 million tenants of registered housing providers (RPs) the right to buy their home could add to pressure on RPs' financial flexibility. If the proposed extension materialises following the election and the pace of sales accelerated, RPs' borrowing capacity could be constrained as their balance sheets would weaken and the value of their available housing assets pledged for borrowings would decrease. This would constrain the RPs' overall capacity to borrow even though the need for social housing is high due to strong demand across the country. The reduction in the available security could also lead to higher borrowing costs. The envisaged extension could lower the RPs' cash flow predictability. Decreasing numbers of social housing units would lead to a fall in RPs' share of social housing revenue. This could put pressure on some ratings. Read more on the Fitch Ratings website.