Social housing finance

Social housing finance encompasses the funding of social and affordable housing projects led by government bodies and non-profit organisations. The sector continues to see a large volume of transactions year on year, driven by the ever-growing demand for social and affordable housing. Lawyers in this field collaborate with a diverse group of clients and stakeholders – including housing associations, arm’s length management organisations, government agencies and local authorities – to advise on a wide range of funding transactions. These include facility refinancings, public bonds, private placements, refinancings emanating from mergers/group reorganisations, intra-group funding arrangements, interest rate derivatives and a variety of sustainable finance funding options.

Although, like many, Natalie Swales had initially been drawn to the hyperbolised glamour of the Bar thanks to TV shows and movies, it quickly became apparent that “the barrister work/life balance and lifestyle was less suited” to her ambitions, both in and outside of work. “I didn’t have a strong desire to work in a contentious area,” she says. “I was much more interested in drafting and negotiating contracts and commercial negotiations.” And there’s something special about being part of a drive for change, social housing finance partner Natalie muses: “I go to bed at night knowing that I’ve played a small part in getting more social and affordable housing out there.”

Life in practice

Despite not knowing what social housing fully entailed at the start of her training contract, Natalie’s split seat between corporate banking and social housing finance was the perfect introduction. Having enjoyed both parts of this seat, Natalie felt a pull towards social housing finance. “The transactions are often larger than your average corporate transactions – sometimes our clients have portfolios where they’re managing a billion pounds worth of debt,” she explains.

It was also important to Natalie that her day-to-day work wasn’t particularly academic: “I didn’t want to work in an area of law where I’d be constantly reading case law and legislation like you might do in an employment or litigation role.” Mapping out a day in the life, she explains that her work varies massively from one day to the next and notes the “very busy period between September to March”, which she says “is when our clients are looking to get their refinances done, secure additional funding to meet liquidity requirements set by the regulator or to negotiate carve-outs to covenants where there have been certain pinch points as a result of project or development cost overruns” ahead of covenant testing at their financial year end.

Natalie can be found working with treasury advisers in “negotiating heads of terms and reviewing indictive terms that are offered by funders”. The team also advises on governance elements “preparing board resolutions and reports on the finance documentation that’s being negotiated”. She adds that the team’s main focus is the “negotiation of commercial finance contracts”, which typically involves “the raising of funds or the refinancing of facilities”, as well as working with clients to manage their treasury portfolios “to obtain the best optimum position to ensure the covenants they have within the loan documentation are sufficiently flexible and not overly restrictive to make sure our clients can meet ambitious development targets and aspirations”.

Big-ticket deals to making partner
 

Given Natalie’s involvement in large transactions and “big-ticket deals”, she’s very often adding new career highlights to her ever-growing collection. She mentions “advising The Riverside Group on its transition from the London Inter-Bank Offered Rate (LIBOR) with Lloyds Banking Group” being a standout career highlight and explains that it was the “first documented transition from LIBOR to the Sterling Overnight Indexed Average (SONIA) in the sector”. She describes the transaction as “fantastic” because it “set the precedent and the pace for the transition of all finance agreements from LIBOR to SONIA” in the sector. With The Riverside Group on her mind, Natalie also looks back on the work she did on its partnership with One Housing Group. “I advised the group on the lender consents required, conducted the due diligence of the loan portfolios and helped to negotiate the covenant changes required as part of the partnership and transfer of engagements by One Housing Group into The Riverside Group.”

Aside from the above highlights, Natalie also reflects on making partner at Devonshires: “This was a real milestone in my career. It was great to be recognised for the hard work I’ve put in since qualifying in 2013, the client base I’ve built, as well as the volume and quality of transactions that I’ve worked on.”

What’s on the agenda?

Shifting the focus from the past to the present, Natalie highlights the importance of being on the ball when it comes to issues and developments in the sector. She cites the environmental, social and governance (ESG) agenda as a hot topic and, applying it to her work in the social housing finance sector, explains that they’re “expecting an uptick in clients looking to secure ESG-linked loans – that being loans whereby if clients hit certain ESG targets and key performance indicators (KPIs), they can secure a margin reduction”, which reduces the interest paid on their loan facilities. Although, on the surface, that might sound fairly straightforward, Natalie indicates the potential issues and “barriers” that clients face: “While they can set stretching KPIs, the cost of demonstrating that a KPI has been met is often prohibitively expensive. One of the problems as a result is that often the financial benefits to the organisation of hitting the KPI are outweighed by the verification costs.”

She adds that “people will say that our clients should be hitting these KPIs anyway because they serve the government’s agenda” and often have a focus in achieving “the move to net zero”. Natalie recognises that  “these are valid points” but notes that “until we get to a point where we can streamline the negotiation of KPIs and the verification of KPIs comes down in cost” not every organisation will be looking at ESG-linked funding options.

Meanwhile, with the hope of “better interest rates” in the not-too-distant future, there’s an expectation that there’ll also be “a better and more appealing fund-raising environment” for housing associations looking to raise new finance and a hope that more favourably priced long-term debt options will become available.

Striking the balance
 

Staying on top of workloads and meeting client expectations requires a number of key skills, including organisation and good time keeping. “This doesn’t mean working late every night or missing lunch hours. It means making sure you don’t have too much work on and if you do, that you speak to someone about it. You should feel challenged and pushed but never like you’re at breaking point” – something Natalie learnt quickly during the early stages of her career.

Diligence is another crucial skill that should make up a lawyer’s portfolio of strengths. “This involves taking time over your work and building in time to review tasks before you hand them in,” Natalie advises. She draws attention to typos – easy mistakes to make – such as getting the client’s name wrong as examples of slip ups that can be “disheartening” and “immediately reduce the impact” of your hard work or the messaging in an email. But Natalie goes on to add that “learning from mishaps such as these is important”, particularly during a training contract where you have the safety net of your supervisor’s review.

These are all skills aspiring lawyers should think about developing and highlighting in all applications for vacation placements and training contracts. Natalie comments that applications to law firms and chambers will be futile unless you do sufficient research into the organisation you’re applying to. If work/life balance and flexibility are important to you, Natalie urges aspiring lawyers to conduct thorough “research into the organisations and areas of law you’re looking to work for/in because some areas lend themselves much better to working more flexibly” than others.

Speaking from a personal perspective, Natalie explains: “One of the many great things about the social housing sector is that it’s full of people with families who like to work flexibly. People should also really consider what working in a certain area of law looks like long term, including the career prospects and likely working hours.” At Devonshires “there’s no expectation that you’ll work at 150% utilisation”, instead everyone at every level is encouraged to “flourish and achieve their potential” while also enjoying “a life outside of work”. Natalie is keen to flag that this doesn’t mean there isn’t an expectation that you’ll work hard at Devonshires, more so that there’s an expectation and recognition that you have and will want a life outside of work.

So, while choosing between becoming a barrister or solicitor can seem daunting to start with, Natalie’s experiences are proof that understanding where you fit in terms of your priorities and ambitions – both personally and professionally – is crucial to a successful and long-lasting career in the legal profession.