The key financing terms in social housing finance
Produced in partnership with Neil Waller of Trowers & Hamlins
The key financing terms in social housing finance

The following Banking & Finance guidance note Produced in partnership with Neil Waller of Trowers & Hamlins provides comprehensive and up to date legal information covering:

  • The key financing terms in social housing finance
  • Financial covenants—introduction
  • Financial covenants—in more detail
  • Other sector specific provisions
  • Additional controls
  • Interest rate options and break costs

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 Note: Social housing entities entering into finance transactions.

Financial covenants—introduction

The key financial covenants in social housing finance are:

  1. loan to value

  2. interest cover

  3. gearing, and

  4. net rental income cover from charged properties

Loan to value covenant

This covenant typically features in all social housing finance transactions.

Nearly all social housing loans are secured by legal charges over social housing properties and as such a key financial covenant is the ratio of the value of these properties to the aggregate outstanding amount of the loan.

Interest cover covenants

Interest cover covenants are found in all kinds of social housing finance transactions.

These are similar to interest cover covenants found in other sectors and compare the amount of earnings or surplus from operating activities to the aggregate amount of interest required to be paid in the same period.

Gearing covenants

These are typically a feature of loan agreements only. As ‘Registered Providers’ (RPs) of social housing do not

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