Housing Corporation says businesses that rely on private sales may not cope in downturn

Housing associations, which the government is relying on to build 70,000 affordable homes a year, are “more exposed than ever” to a downturn in the housing market, according to the sector’s regulator.

A study by the Housing Corporation questions whether the UK’s 1,600 housing associations can cope with a downturn.

The findings follow the increasing diversification of social landlords – whose business has traditionally been in renting homes at cheap rates – into construction and the private sale of shared-ownership homes.

The study, entitled Global Accounts of Housing Associations 2007, demonstrates that the total number of associations with more than 5,000 homes would have lost money in 2007 were it not for private sales. In total, the sector made £542m profit from selling homes, up 8.6% on the previous year. Turnover from shared ownership exceeded £1bn for the first time.

The news follows the collapse of housing association Ujima before Christmas, amid claims it lost money on speculative developments. The report, which uses data from before the credit crunch, says: “Associations are developing business models where the income from shared ownership sales is integral. The key question is whether this business model can cope with a downturn.”

Associations’ turnover rose 9.4% in 2007 to £9.1bn in 2007.

Brendan Sarsfield, chief executive of housing association Family Mosaic, said: “Shared ownership, housing for sale and stock sold in poor condition are more common than ever. It must be a concern to the regulator.”