'We have used the overvalued home like an ATM [cash] machine, and in doing that we have taken debt loads up to record highs.' -- Stephen Roach, former chief economist at Morgan Stanley

We are in the midst of a full blown banking crisis, the banking system is in meltdown, with the taxpayer expected to bail out the banks, even though it was their unfettered greed that got them into the mess in the first place.

 http://www.indymedia.org.uk/en/2008/03/394333.html

The latest scam is asset swap. Smoke and mirrors. The Treasury provides the banks with government bonds, underwritten by the long suffering taxpayer, in return we get the worthless debts the banks want to be shot of.

 http://news.bbc.co.uk/1/hi/business/7352008.stm

Home owners are seeing their inflationary gains melt away, like snowflakes on a hot sunny day, as property values plummet, as we head towards the great property crash of 2010.

The US economy has already gone into recession. Contrary to what we are told by Gordon Brown, the UK economy is in a worse position, as it is more dependent on house prices than the US economy.

Pavilion is going through a process of sweating its assets, seeing what land can be sold off, redeveloped.

 http://www.indymedia.org.uk/en/2008/04/396672.html

Redeveloped does not mean build more social housing or meet an identified social need, it means whatever will maximise returns, which means private housing for sale. Most likely flats, as then the new owners can be milked via extortionate service charges.

Housing associations have borrowed to the hilt to finance lavish lifestyles, fat cat salaries and empire building, the tenants have kindly serviced the debt. They were able to do this whilst property was rising in value, in the same way that householders have been able to use their rising house values as their own personal cash cow. With falling property values there is going to be one big hard crunch. That is one reason why housing associations wish to remove secure tenancies, as at stroke their property portfolio is re-valued upwards.

The Housing Corporation recently found Pavilion to be wanting in the areas of development and governance and downgraded their status.

 http://www.housingcorp.gov.uk/upload/pdf/First_Wessex_Housing_Group_Limited_HCA.pdf

Local councillors have said their status could sink lower, based on their performance.

Tenants and leaseholders are none too happy with their performance.

 http://www.indymedia.org.uk/en/2008/04/396006.html?c=on

A few years ago a massive black hole opened up in the Pavilion accounts. It was the end of the financial year and they had a huge tax liability which they were unable to pay. They, or rather their tenants, were faced with a stark choice, either a massive cut in services or a sharp hike in rents. Many tenants could be forgiven for thinking, was that that not the position already. A cut in fat cat salaries was not an option. Questions put to Pavilion by myself and a chartered accountant, they were unable to answer. They said they'd get back to us but never did. Confidence in their financial probity sank even lower. Pavilion then implemented a tax avoidance scam, they turned themselves into a charity, which at a stroke, wiped out their tax liability. But you can only pull that stunt once.

Questions have been raised in the past regarding the financial soundness of Pavilion when they used lack of money as an excuse for not carrying out repairs.

The Housing Corporation (the industry regulator) has identified up to 10 housing associations which are facing a 'heightened risk' because of their exposure to a downturn in the property market. They do not say which. But do say with plummeting property prices and the increasing reliance on asset stripping to stay afloat, some associations have less than 20 months of credit in place. Or put simply, in 20 months they will run out of liquidity, be unable to pay their way, or in other words, bankrupt.

With an ever tightening credit squeeze, with banks unwillingly to lend to each other, are they going to be willing to lend to or bail out a housing association with a bad reputation?

Falling property values forces more property onto the market, which in turn further depresses property prices, until eventually forced into a fire sale to keep afloat.

What happens if a housing association goes bankrupt?

These are private companies, lack of accountability has led to poor management. Bankruptcy is a very real possibility.

Which raises the question, all things being considered, is Pavilion one of the housing associations that has been identified at risk?

The Housing Corporation is refusing to name the housing associations it has identified at risk.

Could it be a housing association near you?

More on Pavilion:

Pavilion threaten critics
 http://www.indymedia.org.uk/en/2008/04/396759.html

Pavilion gets greedy
 http://www.indymedia.org.uk/en/2008/04/396672.html

Pavilion asbestos scandal
 http://www.indymedia.org.uk/en/2008/04/396456.html

Pavilion – the new slum landlords
 http://www.indymedia.org.uk/en/2008/04/396006.html?c=on