Navigating Financial Challenges: How Riksbyggen Supports Cooperative Housing Associations
In recent years, serving on a cooperative housing association board has become increasingly challenging. Rising interest rates, fluctuating electricity prices, and an overall increase in costs have impacted everything from cleaning contracts to elevator services. Moreover, local tenants may have faced difficulties keeping up with rents that the association deemed necessary to increase.
It has been particularly difficult for many of Sweden's housing cooperatives, and while inflation is now on a downward trend, it doesn't equate to a decrease in costs; rather, it means expenses are not climbing as steeply as before, as explained by Elin Rydbäck, a financial management specialist at Riksbyggen.
As we move into the new year and approach the annual meeting for Sweden's housing associations, it's worth noting that the average lending rate to these cooperatives has more than doubled in less than two years. Even if interest rates have peaked, many associations grapple with fixed loans ready for renegotiation at considerably higher rates compared to just a few years ago.
"The financial burden will likely persist in the coming years, primarily due to rising interest costs tied to renegotiated loans," Rydbäck cautions. For associations that have yet to adopt a long-term financial strategy, now is the time to act. Fortunately, it's not too late; investing in financial planning is especially beneficial during these turbulent times.
Riksbyggen manages the financial administration for nearly 3,000 housing cooperatives across Sweden, providing a stabilizing influence amid economic volatility. According to Rydbäck, these associations have generally fared well in this tumult due to long-term financial planning.
A housing cooperative operates similarly to any business, needing sound financial management to manage expenses and revenue sustainably. Riksbyggen assists these associations in several ways, promoting stable economies, long-term savings, good liquidity, and continuous amortization.
To help mitigate future costs, here are five strategic tips from Elin Rydbäck:
-
Develop a Loan Strategy: Associations should diversify their loans, managing multiple loans with staggered maturity dates. This approach allows for smoother cost fluctuations and reduces the risk of renegotiating substantial loans during peak interest scenarios.
-
Amortize Savings: Rydbäck recommends that associations save between 225 and 325 Swedish kroner per square meter over time. Amortization not only reduces the loan-to-value ratio but also diminishes interest costs, crucial for future maintenance funding.
-
Establish a Maintenance Plan: It's necessary to identify upcoming maintenance needs along with their costs. Having a well-defined maintenance plan ensures long-term financial planning is feasible.
-
Create a Five-Year Budget: With insights on loan due dates and future maintenance costs, forming a longterm budget is possible. This step facilitates financial stability and helps associations avoid unexpected financial strains.
-
Invest in Profitability: While early tips emphasize control, the last tip focuses on optimizing income and expenses. This may involve implementing energy-saving measures like solar panels or converting underused spaces into profitable commercial units, which is where many associations could significantly boost their financial health, elaborates Rydbäck.
In conclusion, Riksbyggen stands as a robust partner for cooperative housing associations in Sweden, helping navigate financial hurdles and ensuring sustainable economic practices are in place. Their commitment to creating attractive and sustainable housing options for residents shines through as they manage over 100,000 rental and 200,000 owner-occupied apartments in over 4,400 cooperatives. To explore Riksbyggen's property management services further, please visit their website.
Related Sources: