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Scotland's Social and Affordable Housing Provider Sector’s Financials Stronger Than English and French Peers

The finances of European Social and Affordable Housing Providers (SAHPs) are at risk from the current economic and financial environment and the cost of living crisis. Risks are coming from rental payment arrears related to the higher cost of living, government-imposed rent caps also affecting revenue growth, rising interest rates and higher construction expenditure costs. At the same time, the need for investment expenditures related to both new and existing housing stock, including fulfilling de-carbonisation commitments, is significant. In this challenging operating and financial environment, the financial standing of the SAHP sector differs significantly from one country jurisdiction to another and this is important in assessing the ability of SAHPs to absorb revenue and cost pressures. In DBRS Morningstar's view, Scotland's SAHP sector stands out favourably, because of its strong financial performance in recent years, and its currently low debt level.

Key highlights include:
• Scotland's Social and Affordable Housing Provider (SAHP) sector limited its debt accumulation in recent years, thanks notably to high grant levels and a favorable rent framework, compared to English and French peers.
• Scotland's SAHP sector's debt levels are significantly lower than its peers, offering higher financial capacity to absorb revenue and cost pressures.

“European Social and Affordable Housing Providers (SAHPs) face a challenging operating and financial environment, including risks of rental payment arrears related to the higher cost of living, government-imposed rent caps and rising interest rates,” said Mehdi Fadli, Vice President in the Global Sovereign Ratings Group. “The financial capacity of the European SAHP sector to weather these challenges differs significantly from one country jurisdiction to another. In our view, Scotland’s SAHP sector stands out favorably thanks to its low debt level.”