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Swan’s credit rating downgraded over sales expansion

Swan Housing Association’s credit rating has been downgraded in relation to its plan for a “significant increase in market sales” from 2019.

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Standard & Poor’s lowered Swan’s rating from A to A-, but with a stable outlook that reflects the HA’s “strong economic fundamentals, supported primarily by high demand for housing in its areas of operation”.

Swan plans to complete a secured development pipeline of 6,500 homes, across all tenures, with a corporate strategy targeting an additional 10,000 homes by 2027.

S&P said Swan is using sales to cross-subsidise social housing development “in response to government grant cuts and continued pressure to deliver more homes”.

“In our view, the high proportion of built-to-sell (nearly 60 per cent of revenues will come from outright sales by FY2020), and Swan’s relatively small size, expose it to the risk of a potential correction in the residential real estate market.”

However, it also noted the “high quality social housing assets in areas of robust demand should somewhat mitigate the downside risk from sales”.

S&P also pointed to the quality of Swan’s relatively modern housing stock and low arrears.


Referencing the sector’s response to fire safety following the Grenfell Tower tragedy, S&P said it anticipates Swan will incur “limited financial costs related to corrective fire safety measures on two of its developments”.

S&P also referenced Swan’s regeneration activity. It said the association had received council land as part of the £300m Blackwall Reach regeneration from the borough of Tower Hamlets at no charge upfront. The council will retain a proportion of the profits as the development is sold in the future.


“This, in our view, aligns the council’s interests with the successful delivery of the project,” the note added.


Swan said it has the financial strength to deliver its development programme and social purpose.


Valerie Owen, chair of Swan, said the board is committed to making a significant contribution to delivering the affordable homes that this county needs.

“We are comfortable that this revised rating was given because we are stretching our assets in a measured and responsible way to meet housing need.”

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