The first significant housing association to feel the impact of the credit crunch emerged this week as the social housing regulator put London specialist association Presentation under official “supervision”, writes Joey Gardiner.

The move, which will see the appointment of three consultants to the association’s board and the registered social landlord (RSL) removed from the government’s development programme, is often a precursor to a forced merger with another RSL.

Presentation owns 6,000 properties in London and the South-east. It was given an “amber” rating in June in the Housing Corporation’s traffic light assessment because of concerns that its assets would not cover the interest on loans it had taken out.

Presentation said: “We understand there’s anxiety in this time of uncertainty in the market and look forward to the assistance of the new board members.”

Between 2006 and 2008 the RSL gained £59.4m of government money to build more than 860 affordable homes. However, the corporation found its projections relied heavily on predicted profits.

The housing corporation predicted that insufficient cash would be generated from operations

The corporation predicted that “insufficient cash [would be] generated from operations to cover interest payments … We expect the group to demonstrate that it can generate sufficient cash flow to service interest payments. This projection will need to fully take into account the risks of a downturn”.

Susan Reizenstein, an independent consultant, Tom Dacey, chief executive of Southern Housing Group, and Tracey Fletcher, finance director of Octavia Housing and Care, have been appointed to the board.

Housing associations are being hit by the credit crunch because many have been using private development to subsidise the loss-making development of affordable homes. In addition, lenders who have traditionally offered favourable rates to associations because of their regulated status have withdrawn funding.

Kate Davies, chief executive of Notting Hill Housing Association, said there were undoubtedly “a number of associations that have over-extended themselves”.