The key financing terms in social housing finance

Copyright © 2025 LexisNexis
Produced in partnership with Neil Waller and updated by Eleanor James of Trowers & Hamlins
Practice notes

The key financing terms in social housing finance

Copyright © 2025 LexisNexis

Produced in partnership with Neil Waller and updated by Eleanor James of Trowers & Hamlins

Practice notes
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This Practice Note looks at the key legal terms which are characteristic of social housing finance transactions and which differentiate it from financing terms in any other sectors. It considers in particular typical financial covenants and other key sector specific provisions, including events of default, as well as provisions linked to the availability of long-term fixed rate interest options.

For more information on social housing finance transactions, see Practice Notes:

  1. •

    Social housing entities entering into finance transactions

  2. •

    Key deal structures in social housing finance, and

  3. •

    Taking and enforcing security from social housing entities

This Practice Note purely focuses on private not-for-profit providers of social housing registered in England, referred to in this Practice Note as ‘RPs’, since they account for the vast majority of private debt finance raised to date by housing associations. It does not cover providers of social housing that are registered in Wales.

Financial covenants—introduction

The key financial covenants in social housing finance are:

  1. •

    loan to value

  2. •

    Gearing

  3. •

    interest

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Interest cover definition
What does Interest cover mean?

Interest cover measures the amount of interest paid by a company on its borrowings against its operating profit in the same period. The ratio shows the impact of gearing on a company’s profit and loss account. If the figure is low, a small reduction in operating profits, or a rise in the cost of borrowing, can wipe out pre-tax profits. To calculate interest cover, divide the operating profits by the interest paid. Example: a company which has profits of £4 million and which pays net interest of £1 million, has interest cover of 4.

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