Housing associations have been warned their credit ratings could be downgraded if they are heavily exposed to the sales market.
According to credit rating agency Fitch, the Homes and Communities Agency has devised a new regulatory framework to prevent diversification efforts putting social housing assets at risk.
Fitch stated that while it is confident this target will be achieved, it is prepared to review its ratings if this does not happen, Inside Housing reports.
Figures from the organisation indicate that non-social housing activity turnover represents more than 40 per cent of total turnover at just four of 336 housing associations.
The body pointed out that registered providers with "a higher level of operating earnings from volatile housing development tend to have lower ratings than those with a high proportion of revenue from social housing activities".
Fitch added that housing associations can best manage sales and development risks if they "avoid becoming too dependent on them".
This comes shortly after an earlier report from Fitch highlighted the social housing sector's diversification into areas such as renting to the private sector in participating in larger-scale construction projects.
The credit rating agency said this has made the sector more exposed to risk following "decades of stability".
Patricia Umunna, a partner at Winckworth Sherwood Solicitors, commented: "Associations are being caught between a rock and a hard place. Our clients are having to increasingly look to private funding and non-social housing activities to raise finance for much needed development with the prospect of such finance becoming more expensive as a result of regulatory concerns and credit rating downgrades.”