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Landlords have ‘little margin for error’ as interest cover falls to lowest since 2018, RSH warns

News06.11.25by lara bowman

Landlords face rising costs, tighter finances and rocketing insurance premiums, leaving them with “very little margin for error,” the Regulator for Social Housing (RSH) has warned in its latest Sector Risk Profile.

“Sharp increases in the cost of insurance could constrain landlord finances and divert resources from investment in new supply,” the report states (picture: Alamy)

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Landlords have “little margin for error” as interest cover falls to lowest since 2018, RSH warns #UKhousing

Published today, the report highlights how rising insurance premiums, driven by new safety regulations, perceived risk in the post-Grenfell era and rising construction and labour costs, are squeezing social landlords’ fiscal headroom.

“Sharp increases in the cost of insurance could constrain landlord finances and divert resources from investment in new supply and the maintenance of existing homes,” it states.

Many insurers are reluctant to underwrite complex social housing portfolios, particularly high-rise or multi-occupancy blocks. The report adds: “Insurers have increasingly been finding that properties are costing more to reinstate than the declared value.”

Less competition pushes premiums higher, forcing landlords to dedicate more resources to essential coverage rather than investment in new homes or maintenance.

Providers’ EBITDA MRI interest cover fell to 91% in 2024-25, the lowest level since 2018, and is not expected to rise above 100% until 2027-28. This financial metric is used to assess a landlord’s ability to meet interest payments on debt.

‘Earnings before interest, taxes, depreciation and amortisation’, the first half of the acronym, measures operational profitability, while ‘major repairs included’ factors in substantial repair costs.

Aggregate interest cover over the first five years of forecasts has fallen from 190% in 2017-18 to 106% in 2024-25. “Low headroom leaves landlords with very little margin for error,” the RSH warned.

Debt levels continue to rise, exceeding £105bn drawn from £136bn of agreed facilities by mid-2025.

While most debt is fixed for more than five years, some landlords will need to refinance at higher rates, exposing them to additional risk.

The English regulator stresses the importance of effective treasury management and early engagement with lenders, including stress testing assumptions and understanding covenant implications.

The report also repeatedly emphasises the importance of reliable, comprehensive data, finding that some landlords lack accurate, or even digitised, information.

“Boards must ensure they have the skills, systems and insight to understand what the data is showing and how to act on it,” it states.

Weak or outdated data has been linked to a “significant number of regulatory findings”, with landlords unaware of stock condition, safety checks or tenant communications.

Accurate data is cast as no longer just an operational convenience but a strategic safeguard and a factor in managing insurance risk.

Beyond finances, landlords are advised by the report to maintain high standards in tenant safety, stock quality and building management.

The report underscores compliance with fire safety requirements, Awaab’s Law, electrical safety regulations and the anticipated Decent Homes Standard review. Weak data and poor risk management were directly linked to breaches, and now data failures alone can trigger regulatory downgrades.

Diversification and new supply also remain under pressure. Providers plan to deliver 274,000 new homes over the next five years, a 6% decrease from 2024 projections, with 93,000 homes expected for sale.

“Boards must ensure diversification is strategically justified and does not threaten the core social housing mission,” the regulator advises.

Similarly, supported housing is under particular pressure from rising labour and operational costs. Boards must understand funding risks, stress test against loss of contracts and ensure adequate staffing and oversight.

“Poorly managed supported housing risks undermining tenant outcomes and financial viability,” the report states.

Fiona MacGregor, chief executive of the RSH, 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.”