Major care provider expected to ride out COVID-19 impact as demand stays strong, says S&P

News29 Jul 2020 Former Member

A major housing and care provider that was downgraded by the regulator last month over rent-setting issues has retained its credit rating from Standard & Poor’s (S&P).

Housing 21’s revision of its development programme to focus on rental units will support its “gradual improvement in its margins” (picture: Getty)

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Major care provider expected to ride out COVID-19 impact as demand stays strong, says @SPGlobalRatings #UKHousing #SocialHousingFinance

Revision of development programme to focus on rental units will support @Housing21 in a “gradual improvement in its margins and alleviate the pressure on its debt metrics”, says @SPGlobalRatings #UKHousing #SocialHousingFinance

Birmingham-based Housing 21 (H21), which manages around 21,000 retirement and extra care living properties for older people across nearly 200 local authority areas in England, remains at an ‘A’ rating with S&P, despite concerns over the impact of COVID-19.

In an update published last week (24 July), S&P said: “We anticipate a decline in rental revenues [for H21] this year due to increasing arrears over the lockdown period, as well as rental losses due to the higher void rate.”

The agency voiced similar concerns in updates last week for Hyde Housing Group and Silva Homes.

Despite its concerns, S&P said “continued strong demand” for H21’s services due to the UK’s ageing population and a “higher proportion of revenues from higher-margin rents than we previously assumed will support a gradual recovery in the group’s profitability over the next two to three years”.

It added: “We understand that H21 has revised its development programme to focus on rental units, which, in our view, will support a gradual improvement in its margins and alleviate the pressure on its debt metrics.”

In a statement to Social Housing, H21’s chief financial officer Paul Weston said: “Our focus continues on providing more homes for older people whilst also investing significantly in our existing properties, which is reflected in our financial profile from a rating perspective.

“Our development plans focus on providing over 75% of these properties as rented with the balance being shared ownership with no outright sales.”

S&P said it anticipated that H21 will raise additional funding in the current financial year to develop new properties.

H21 was downgraded by the Regulator of Social Housing (RSH) last month to a governance rating of G2, after it was found to have overcharged £3m on rents.

S&P noted this but said it understood the issues were “technical in nature” and H21 was addressing them. “As such, we do not consider them to reflect a weaker governance culture,” the agency said.