November 15, 2012 / 8:36 PM / in 5 years

Fiscal cliff could have deep impact on muni housing: S&P

NEW YORK (Reuters) - Standard & Poor’s Ratings Service said on Thursday that the “fiscal cliff” could have far-reaching effects on U.S. municipal housing given the sector’s deep links to federal spending.

“The impact of budget sequestration and tax increases on municipal housing would be multifaceted,” the credit rating agency said in a statement, mentioning operational or rent subsidies, mortgage insurance, loan purchases, and loan securitization.

One of the clearer impacts would come from the proposed budget sequestration of $154 million in capital fund grants that the U.S. Department of Housing and Urban Development provides to public housing authorities (PHAs), S&P said.

S&P rates 37 PHAs issues. Of those, 21 are rated AA-minus, 14 are rated either A-plus or A, and two are rated BBB. Seventeen have negative outlooks.

“Should sequestration take effect, we would review all capital fund ratings to determine the impact of an 8.2 percent reduction in capital grant receipts, in addition to the other capital grant reductions that we assume,” the rating agency said.

Reporting by Reuters municipal bond team: Editing by James Dalgleish and M.D. Golan

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