The revision of the United Kingdom's Outlook to Negative from Stable will have no immediate impact on the ratings of UK registered providers (RP) of social housing. In Fitch's view RPs still benefit from strong government support by way of public funding and regulatory oversight.
Fitch applies a "bottom-up" rather than a "top-down" approach to social housing ratings which means the ratings of RPs are not credit linked and do not automatically move in line with any rating action on the UK sovereign. Furthermore, a hypothetical one notch downgrade of the UK sovereign rating would not affect the agency's view of potential support from the UK government.
The standalone assessment incorporates the fact that over 70% of the turnover of RPs comes from the government by way of housing benefits. In addition, significant capital grants are received by RPs from the Homes and Communities Agency (HCA), who in turn receives it from the government. Therefore, RPs with a high level of turnover from social housing activities would tend to be rated higher than those which have a high proportion of revenues from development activities.
In addition Fitch also applies a two notch upgrade to the standalone assessment of the RP to take into account the strong regulatory environment and any extraordinary support that the central government could provide to an entity or the sector. Fitch views that RPs provide an essential function in the provision of affordable housing and the UK government would wish to maintain confidence in the sector and also in the ability of RPs to access long-term funding.