Pricing up the future

So now we know – the answer is -0.9 per cent.

The question, of course, was ‘What change in rents will RSLs be able to implement in 2010/11?’

After the dire predictions, which maxed out at around -3 per cent, this change is relatively marginal. Very few RSLs will be significantly affected, and those that are were probably sailing too close to the wind in the first place.

However, as usual in the affordable housing business, things aren’t quite as simple as they seem at first sight. Rent levels are tied into legal agreements such as loan covenants, making even a marginal reduction in rental income a potential headache for some.

As our news story this month highlights, this means some RSLs risk re-pricing of their borrowing deals. And cross-cutting agreements mean that one default is often sufficient to trigger defaults across the association’s entire portfolio.

Even those which are precipitated into this situation should however be able to re-negotiate terms. It’s fortunate that margins have been dropping in recent weeks, with lending competition picking up once more.