In a report issued yesterday, which is an update to the markets and does not constitute a rating action, Moody’s said the conclusion reflects supportive policy announcements for the sector but also increasing exposure to non-social housing activities.

Although the sector’s total debt will surpass £36 billion next year, increased revenues will help to hold the debt to revenue ratio steady in 2018.

According to the report, the UK policy environment will remain stable over the next 12 to 18 months. The improved policy environment reflects the removal of the Local Housing Allowance (LHA) cap, the provision of an additional £2bn in capital grants for new affordable housing, the rent settlement which allows HAs to increase social housing rents from 2020 at 1% above the consumer price inflation (CPI) rate and the recent measures outlined in the Autumn Budget 2017 to promote house building.

The sector continues the trend towards diversification as housing associations move away from their core business of social housing provision, it added. Open market sales activity is set to contribute 18% of turnover in 2018, and grow to 26% in 2019.

Jeanne Harrison, a Moody’s vice president, senior analyst and co-author of the report, said: “UK housing associations have contained costs and are expected to maintain high operating margins of 29% in 2018, down only slightly from the previous year. The sector will increase market sales to continue to subsidise social housing development, increasing exposure to volatility risk.”