It has been over a month since the UK voted to leave the EU and many are waiting to see the impact that Brexit will have. Over the past 18 months there has been a lot of change within the housing sector, and Brexit will bring about even more change for housing associations. Some of the biggest changes include:
Moody’s, who provides the credit ratings to more than 40 housing associations, downgraded the credit rating of 22 of these housing associations from stable to negative following Brexit. Moody’s believes that there will be an extended period of uncertainty following the “leave” vote, which will weigh on the UK’s economic and financial performance. Housing associations could be affected by renewed pressure on public finances and spending cuts which would further reduce housing associations already restricted revenue. Also, the potential loss of EU funds would cut housing associations budgets even more.
After the referendum, the pound fell in value. Whilst this has since levelled out, there is much uncertainty around the stability of the pound. If the pound falls in value again (which many believe it will), interest rates will rise. This means that borrowing will become more expensive for both housing associations as well as people who want to purchase shared- ownership or market- sale properties. Devaluation of the pound will also increase inflation which means tenants of housing associations will spend a much greater percentage of their income on food and other basic sundries.
Housing Supply & Labour
Another worry for housing sector is that the housing supply and demand will slow down. Housing associations have said they will increase their offering by delivering 120,000 new homes every year by 2033. However, leaving the EU could impact this as the housing sector relies very heavily on European labour in construction, repairs and maintenance. If there is no free flow of labour, there could be a shortage of essential work skills. It has been suggested that the Government will suggest a new immigration system to ensure those with desirable skills can still work in the UK. However, if a more rigorous process with less benefits is introduced, it could make the prospect of working in the UK less attractive.
The outcome of the referendum in June is still very much uncertain. There are going to be many challenges for the housing sector going forward. Therefore, housing associations are going to need to be ready for a lot of change in the near future.