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Homes England’s vision: private partnership for public good
Opportunity knocks for new entrants to the UK housing scene, writes Jon Bull-Diamond
At Homes England, we understand that as affordable housing providers look to contend with a range of challenges facing existing stock, such as fire safety and environmental improvements, it’s natural for resources to be diverted from new supply.
New sources of finance can offer the sector greater flexibility to improve existing portfolios and deliver new affordable homes. With several large institutional investors moving into the affordable sector in recent months, we believe that there is a great opportunity to explore new partnerships.
Institutional investors have long been the buyers of debt issued by housing associations. We now see their interest in the housing sector growing, and they are ready to deploy both equity and debt to finance the development of new affordable homes and to be longer term custodians of these assets.
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The good news for providers and investors is that the opportunity is there for new entrants. We estimate that the residential share of institutional property portfolios in UK is less than 10% compared with more mature markets, including the USA at around 25% and the Netherlands leading the way at more than 50%. We expect the UK share to grow and for some of this to be directed towards affordable housing.
Affordable housing is a credible candidate for additional institutional investment. Investors have increasing requirements to demonstrate the impact of their investments and to select assets that met their environmental, social and governance (ESG) criteria.
Affordable housing offers an investment with demonstrable social need, operated by well-established organisations with rigorous regulation in place.
The build-to-rent sector (BTR) is showing the way for the wider housing market. Private capital has been instrumental in establishing an under-served part of the market to meet demand for good-quality rental housing and create new, thriving communities.
Across the country, there are almost 200,000 new homes either completed or in construction, and plans for new BTR developments increased by more 50% in the past 12 months. Investors are increasingly looking at other residential tenures.
As the government’s housing agency, we want to support institutional capital seeking to invest in housing, by making interventions to unlock that investor appetite.
In March, we agreed a £10m investment with M&G to support the launch of their shared ownership fund. The recoverable investment from Homes England will help accelerate the delivery of 2,000 affordable homes through M&G’s partnership with Hyde Group and housing associations across the UK.
The partnership will provide Hyde with the capital to grow its development ambitions and build additional homes in the areas it serves.
Our commitment to the fund is part of our aim to provide investors with greater confidence that housing, including shared ownership, has strong government backing and can play a more prominent part in residential investment strategies.
“Private capital has been instrumental in establishing an under-served part of the market to meet demand for good-quality rental housing”
We also agreed a £20m investment into Man Group’s community housing fund, forming part of a potential £400m fund to build 3,000 new homes by 2026. Again, we want to send a signal that investment in all types and tenures of housing is something we’re keen to encourage.
Alongside these funds, in April we announced that for the first time we’re opening up our strategic partnership programme to a broader range of organisations than ever before, including for-profit providers, developers and local authorities for the first time.
As we set out on our course in a post-pandemic world, it’s more important than ever to collaborate and look for new opportunities. We’re keen to work with providers from all sectors to unlock the £7.5bn of funding from the Affordable Homes Programme and use our full range of connections and resources to find ways for new partnerships to emerge.
Jon Bull-Diamond, director of products, equity and partnerships, Homes England
He will be speaking on day three of the Inside Housing, Homes England Development Summit on 1 July
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Amid the housing crisis and with increasing demands on local authorities, developers and housing associations to deliver more homes, the Inside Housing and Homes England Development Summit brings together the public and private sector to collaborate towards the effective delivery of homes across England.
This is not a conference. It is a business meeting of decision-makers on delivery and how to build more quality homes.
To find out more, click here.
