How Riksbyggen Can Support Housing Associations in Economic Turmoil
In recent years, serving on a housing association board has become increasingly challenging due to rising interest rates, fluctuating electricity costs, and escalating expenses in services from cleaning to elevators. Many local tenants have found it difficult to manage rent increases that are necessary for the association's financial health. The struggles faced by various housing associations across Sweden have been hard to ignore. Although inflation is declining, costs are not expected to drop significantly; they are merely not increasing as quickly, according to Elin Rydbäck, a financial management expert at Riksbyggen.
As 2023 comes to a close, housing associations are gearing up for their annual meetings. Alarming statistics from Statistics Sweden reveal that the average lending rate for these associations has more than doubled in less than two years. While interest rates may have peaked, many associations are still saddled with fixed loans that will soon require renegotiation at much higher rates than previously encountered.
Elin Rydbäck reassures that the situation, while challenging, is not insurmountable. In fact, it’s crucial for housing associations to adopt long-term financial strategies now. Riksbyggen manages the financial affairs of nearly 3,000 housing associations across Sweden, a sector that has remained relatively stable during turbulent times. This stability is largely attributed to the associations' proactive long-term financial planning.
"A housing association functions similarly to a business; it has income and expenses that must be managed sustainably over time," says Rydbäck. To aid in this, here are five essential strategies that can help various associations navigate their financial challenges and avoid extreme fee hikes in the future:
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Create a Loan Strategy to Mitigate Impacts: Riksbyggen encourages associations to diversify their loans, managing five or six types with staggered maturity dates. This approach mitigates the risks associated with high interest rates during renegotiation periods.
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Amortize Savings for Maintenance Needs: It's advisable to allocate between 225 and 325 kronor per square meter over time to effectively cover future maintenance costs. Proactive savings through amortization can lower overall debt and interest burdens.
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Establish a Comprehensive Maintenance Plan: A successful long-term plan must entail not only identifying necessary repairs but understanding their projected costs and timelines. Knowledge is key to effective financial management.
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Develop a Five-Year Budget: By recognizing loan maturity dates and anticipated maintenance periods, associations can construct long-term budgets, reducing the chances of unexpected financial strains.
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Invest in Income Optimization: Beyond managing costs, associations should look into avenues that can enhance their profitability, such as investing in energy-efficient solutions like solar panels or repurposing unprofitable areas into offices or residences.
Elin Rydbäck emphasizes that employing these techniques can lead to improved stability and increased profitability for many Swedish housing associations.
Riksbyggen is a collaborative company renowned for being one of Sweden's largest housing developers and property managers, aiming to create attractive, sustainable housing solutions for all. With a portfolio that includes over 100,000 rental apartments and 200,000 condominiums within 4,400 housing associations, Riksbyggen also provides extensive property management services to numerous commercial and public estate clients throughout the country. For those seeking more information about Riksbyggen's property management services, additional resources and location details are available online.
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