Navigating Financial Challenges: How Riksbyggen Can Support Housing Associations
In recent years, serving on a housing association board in Sweden has become increasingly challenging. Rising interest rates, volatile electricity prices, and a general increase in costs have affected everything from cleaning contracts to elevator services. In addition, many local tenants have struggled to meet the rent, which force associations to consider necessary increases.
The difficulties facing many of Sweden's housing associations are apparent. Elin Rydbäck, a financial management specialist at Riksbyggen, notes that even as inflation begins to decrease, costs remain high, merely rising at a slower rate. This situation creates an urgent need for housing associations to reassess their financial strategies.
With 2023 soon concluding and another annual meeting on the horizon, housing associations are facing renewed pressure. According to Statistics Sweden (SCB), the average lending rate for these associations has more than doubled in less than two years. Even with potential interest rate stabilization, many associations are tied to fixed loans that will soon require renegotiation, likely at much higher rates than a few years ago.
In this context, proactive financial planning has become more crucial than ever. Riksbyggen currently manages the financial administration for nearly 3,000 housing associations in Sweden, which have generally weathered these turbulent times well due to their long-term financial planning initiatives. Rydbäck emphasizes that housing associations function similarly to businesses, where careful management of expenses and income is vital.
To assist in navigating these financial challenges, Rydbäck shares five tips aimed at minimizing future fee hikes while promoting sustainable financial health:
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Implement a Robust Loan Strategy: Many associations Riksbyggen advises employ a multi-loan approach, with various repayment dates. This strategy helps to spread out cost increases over time and reduces the risk of facing a significant financial blow during peak interest periods.
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Amortize Savings: Riksbyggen recommends that housing associations save between 225 and 325 kronor per square meter consistently over time. This practice is critical for managing future maintenance needs, as ongoing savings allow for reduced debt levels, translating into lower interest costs.
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Establish a Comprehensive Maintenance Plan: Identifying necessary maintenance is only part of the equation. Creating a clear financial outline for upcoming maintenance is essential for long-term planning and prevents unexpected costs from arising.
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Develop a Five-Year Budget: With a thorough understanding of loan repayment schedules and anticipated maintenance costs, housing associations can create a stable long-term budget that mitigates unexpected financial shocks.
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Focus on Enhancing Profitability: While previous tips center on financial control, this last tip is about optimizing income. This could mean investing in energy-efficient solutions like solar panels to reduce energy costs or converting less profitable spaces into commercial units or apartments.
Riksbyggen, a nationwide cooperative organization, stands as one of Sweden’s largest housing developers and property managers. Their commitment is to create attractive and sustainable homes for everyone, managing over 100,000 rental apartments and 200,000 condominiums across more than 4,400 housing associations.
As housing associations prepare for a potentially tumultuous financial landscape, Riksbyggen’s strategies can provide essential guidance to ensure their long-term success and stability.
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