Fitch encouraged by regulatory support of UK social housing

Fitch Ratings says it is encouraged to see regulatory support of its analytical approach to rating the UK social housing sector.

Fitch says the events following the collapse of Ujima Housing Association, a service founded in 1977 to assist young, single black people living in London, in December 2007 demonstrate the effectiveness of the regulatory regime put in place in the UK social housing sector and the responsiveness of the Housing Corporation to a Registered Social Landlord in financial difficulties.

Joanne Wong, senior director of Fitch’s Europe, Middle East and Africa structured finance department, says: “Fitch is encouraged to see the basis for its legal analysis of social housing transactions underpinned by the Uijma example.”

Fitch’s analytical approach to rating these UK social housing transancitons is based on a cash-flow analysis with stresses on rental, maintenance and management costs, and the level of void properties.

Ongoing payments of the loans are based primarily on projected and stressed rental income adjusted for arrears, defaults on rent payment, voids, management and maintenance expenditure.

The analysis does not rely on the enforcement of any security in case of defaults; however, the continuity of supervision and regulatory powers of THC are important considerations in the rating process in that they provide a solid basis for the underlying assumptions that rental income will continue to be generated.