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Breaking Bad was a classic box set, wasn’t it? The hero of the hour was Walter White. He spent a lot of his time looking after huge piles of cash. My goodness, we do need him back, don’t we? Housing associations have exactly the same problem as he did. (Though I hasten to add that the money has come from bonds not drugs.)
There’s not a landlord in the country that isn’t ready for the Credit Crunch of yore. We are awash with dosh. That’s great as it shows we are learning from the past. But is liquidity enough to see us through the next crisis? Well, it’s a start but there’s still a lot of hazards to watch out for.
The dream scenario is that you have cash when no one else does. So you can snap up sites and blocks for a song. It’s a good idea and it worked like stink for some last time out.
But will it go so well now? You could be outbid by firms from stronger economies. The power of the Dollar or Euro or Renminbi might swat your peely-wally Pound aside. Then what do you? You could be sitting on cash that earns less in interest than you are paying for it. And inflation could be eating away at it, too. Your cash will be evaporating. Not so much the Angel’s share but the special place in Hell’s share.
But there’s plenty of things you could do with the money. You could bail out your suppliers. Some of them are bound to run short. They just can’t raise money as easily as associations. You need to keep the builders and IT firms going so you could have no option other than to prop them up. And if we go back to austerity the axe will fall on benefits. That means you might need to help tenants get by. Also, it could be the time to go easy on the shared owners. And there’s more. What if we get the riots the police are warning us about? Will you have to spend more money on security? The list goes on.
What’s the problem? Well, if you don’t do what you said with the cash from the bond, that could affect your credit rating. That means when you ask for more money the price goes up. The business just isn’t as strong as you told them it would be. And there’s a penalty for that.
Of course I am painting a bleak picture. Yes, it is tremendous that associations have gone out and got cash. But please do keep stress testing. Too many of us thought that market sales or private rents were the answer to everything. They’re not. As Newton said, for every action there is an equal and opposite reaction.
In other words, whatever you do has an upside and a downside. And on no account blame Brexit for your ills. That won’t wash. You must have noticed Nigel Farage’s long campaign. If you didn’t have it on the radar then we’ve got to ask a big question. What else are you missing? Don’t fall into that trap.
By Alistair McIntosh, HQN Chief Executive