In this article, S&P Global Ratings provides comparative statistics for the 62 rated social housing providers (SHPs) in the U.K. (42), Germany (9), Sweden (4), France (4), Canada (1), the Netherlands (1), and New Zealand (1).

It is likely that our ratings on the non-U.S. SHPs will remain largely within the 'A' category, but there is a slight bias toward the weaker end (see chart 1). The negative bias remains, and 68% of the non-U.S. SHP ratings have a stable outlook (see chart 2), which is an improvement from November 2023 (65%), when we last published our ratings risk indicators. However, this has deteriorated from Jan. 1, 2022, when 85% had a stable outlook. Macroeconomic and regulatory pressures drive pressure on the ratings. This has impacted the creditworthiness of the non-U.S. SHPs, particularly financial performance and debt metrics.

A year ago, we had eight issuers in the U.K. with 'A-' ratings and a negative outlook. Since then, we downgraded two issuers to 'BBB+' and stable outlooks and revised the outlook on four to stable from negative. Two issuers have 'A-' ratings with a negative outlook. There is still a moderate risk that we could downgrade more SHPs to the 'BBB' category over the next two years (see chart 2). The addition of ratings with a stable outlook has reduced the negative bias somewhat, and three outlook revisions to stable from negative in the U.K. occurred alongside downgrades of their respective rating.

Eight of the 26 (31%) U.K. SHPs that we rate at 'A' or above have negative outlooks, compared to the 12 of 31 (39%) SHPs we rated 'A+' or higher in March 2023. Despite the outlook normalization ratings could slip among this group. This could be the case if, contrary to our expectations, inflation and interest rates remain persistently high over the next two fiscal years, and management is unable to take corrective measures (see "U.K. Social Housing Providers' Credit Headroom Could Tighten If The Operating Environment Deteriorates," published Oct. 4, 2023).

Chart 1

Chart 2

Below, we provide comparative statistics for each rating, showing how our assessment of financial performance, the debt profile, and liquidity correlate with the different ratings.

We consider that a non-U.S. SHP's financial performance, measured by the consolidated group's S&P Global Ratings-adjusted EBITDA margin, is a solid indicator of creditworthiness and underpins the rating (see chart 3). Non-U.S. SHPs rated 'AA-' typically have adjusted EBITDA margins of close to 35%, gradually declining to an average of close to 20% for the 'A-' rated entities. However, the difference between the lowest and highest adjusted EBITDA margins at each rating increases with the rating.

Chart 3

The stronger the SHPs' debt metrics, the greater the likelihood of them having a higher rating (see chart 4). Most 'AA-' rated entities have a debt-to-nonsales adjusted EBITDA ratio of 17x or below, gradually deteriorating to about 26x for entities rated 'A-', and to more than 35x on average for entities rated in the 'BBB' category. Equally, the 'AA-' rated entities have very strong adjusted nonsales EBITDA interest coverage of close to 4x on average. This is typically because their debt funding comes from their respective government and local authority at low interest rates. The interest coverage ratio falls to 1.2x for entities rated at the lower end of the 'A' category, and below 1.0x on average for the group of entities rated in the 'BBB' category.

Chart 4

In our assessment the SHPs' liquidity ratios do not have the same correlation with the ratings as the debt ratios (see chart 5). This is mainly because the entities that we rate 'AA-' typically have lower liquidity coverage, offset by strong ties with their respective governments or local authorities. These either provide ongoing liquidity support or would likely provide extraordinary support when needed. Otherwise, liquidity coverage remains solid across our non-U.S. SHPs, supported by an average liquidity ratio of 2.0x on average.

Chart 5

Table 1 contains our ratings and outlooks on SHPs, as well as indicators for our assessment of their market dependencies, financial performance, debt profiles, and liquidity. We calculate the ratios as a five-year average, including two historical years, the current year, and two forecast years. The data is as of Feb. 29, 2024.

Because non-U.S. providers of social housing have a public policy role and strong ties with governments, the issuer credit ratings on these entities combine our assessment of the stand-alone credit profile (SACP) and the likelihood of extraordinary government support. In the case of SHPs, the application of our criteria for government-related entities (GREs) may raise the final issuer credit rating relative to the SACP. (For more detail on our GRE methodology, see "Rating Government-Related Entities: Methodology And Assumptions," published March 25, 2015.)

Table 1

Related Criteria

• Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
• Methodology For Rating Public And Nonprofit SHPs, June 1, 2021
• Group Rating Methodology, July 1, 2019
• Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015
• General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

Related Research

• European Housing Markets Forecast Brightens Amid Ongoing Corrections, Jan. 25, 2024
• Non-US Social Housing Outlook 2024 At a turning point, Nov. 29, 2023
• Non US Social Housing Providers Ratings Score Snapshot, Nov. 15, 2023
• Non US Social Housing Providers Ratings Risk Indicators, Nov. 15, 2023
• Regulatory Framework Assessment: Social Housing Providers In The U.K. Benefit From Strong Regulatory Frameworks, Oct. 23, 2023
• United Kingdom 'AA/A-1+' Ratings Affirmed; Outlook Stable, Oct. 20, 2023
• U.K. Social Housing Providers' Credit Headroom Could Tighten If The Operating Environment Deteriorates, Oct. 4, 2023
• Regulatory Framework Assessment: German Public Housing Providers Face Increasing Political Demands But Benefit From Strong Institutions, Oct. 3, 2023
• Regulatory Framework And Systemic Support Assessments For Nonprofit Social Housing Providers, Sept. 8, 2023
• Freeze On Livret A Rate Should Boost French Social Housing Providers’ Credit Metrics, July 17, 2023
• Regulatory Framework Assessment: Social Housing Providers In France, May 30, 2023
• Regulatory Framework Assessment: Swedish Public Housing Providers' Rent-Setting Scheme Balances Income And Costs, May 22, 2023
• U.K. Social Housing Borrowing 2023: On Pause, March 28, 2023
• Non-U.S. Social Housing Providers Ratings History: March 2023, March 27, 2023
• U.K. Social Housing Providers Set Their Sights On Cyber Risks, Dec. 16, 2022
• Regulatory Framework Assessment: Social Housing Providers In Netherlands, July 7, 2022