Southern plans return to development after improving interest cover

Southern Housing is preparing to return to development as its cash interest cover position improves.

The G15 landlord in 2024 announced it was halting entering new development commitments until its interest cover position improved.

Southern’s starts dwindled to just 39 units last year as a result of this decision.

However, in a trading update today, the group said its cash interest cover golden rule (EBITDA major repairs included cash interest cover excluding sales) has improved from 27% to 49% and it expects to hit 100% by 2029.

Tom Paul, chief financial officer at Southern Housing, said: “As our cash interest cover is now improving, and we can see a clear pathway to 100%, we’re now able to ready ourselves for future development activity as planned.

“We are now in discussions with the Greater London Authority (GLA) on delivering a development programme over the medium term.”

Interest cover effectively measures the extent to which a provider’s operating cash can cover its interest payments. A figure of less than 100% means a provider is not generating enough cash from its core operating activities to cover its interest payments and is therefore seen as unsustainable in the long-term. Southern therefore halted taking on fresh borrowing for development and cut costs to improve its position.

Paul said the “turning point” was achieved by a reduction in uncompleted homes, more rental income on completed homes and Southern’s efficiencies drive, which included redundancies in its development team. The organisation has achieved £25m in efficiencies since 2022, £10m in 2026/27 with a further £20m targeted for the two years following this.

Paul added that Southern is hopeful of securing funding through the government’s £2.5bn low cost loans scheme, which is designed to help providers develop without increasing their interest costs. The idea was drawn up by Southern and first recommended by Housing Today and the G15 last year.

The update also said Southern completed 937 homes in 2025/26, up from 807 the previous year. These homes were started before Southern’s development freeze.

Southern said its turnover in 2025/26 was £720m, up 7% on the £674m reported the previous year. Its operating surplus increased from £123m to £185m over the same period while its surplus after interest rose from £18m to £67m.