RSH says financial performance of RPs has fallen for seven successive years
The combined interest cover of registered providers in England will not return to 100% for another three years, according to the Regulator of Social Housing (RSH).
In its annual sector risk profile publication, the RSH said the financial performance of RPs fell again in 2024/25, as it has every year since 2018/19.
Registered providers’ EBITDA-MRI cash interest cover, which effectively measures how many times a providers’ operating cash can cover its interest payments, fell to 91% in 2024/25.
A figure of less than 100% means a provider is not generating enough cash from its core operating activities (after accounting for major repairs investment) to cover its interest payments. It is therefore seen as unsustainable in the long-term to be below 100% as this could present challenges around viability and liquidity.
Some housing associations have been scaling back development, which involves taking on debt, in order to improve their interest cover ratio.
RSH said: “Pressures are concentrated among large landlords in urban areas that own large numbers of flats in need of further safety and quality work.”
It is “essential” boards have a strong internal controls framework, combined with a thorough understanding of where risk sits within their organisation and an accurate and up to date assets and liabilities register
It said: “Boards will need to ensure that they are closely monitoring their financial position, including covenant compliance, and that they are engaging positively with funders at an early stage.”
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The RSH also said social landlords must continually improve their governance and risk management if they are to stay resilient, warning that there is “little margin for error” due to ongoing financial measures, although it said the risks are not evenly distributed across the sector.
It said social landlords should be stress testing their business to ensure they can deal with external shocks as well as risks with tenants’ homes.
Fiona MacGregor, chief executive of the Regulator of Social Housing, said: “Ignoring the value of good governance weakens social landlords’ resilience against risk.
“This is more important than ever, at a time when risks are intensifying and pressure is growing to deliver more and better social homes.
“Only by focusing on governance, informed by robust data and risk management processes, can landlords make the right strategic decisions and improve social housing in the long-term.”
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