The L&G/Hyde partnership is a trailblazing example of the power of institutional investment

The sector’s housing assets are carried at around £218bn in the accounts. That means, on a blunt reading, the sector has over £110bn of net equity locked in its balance sheet: a resource that, if mobilised even partially, could transform the pace and scale of affordable housing delivery in this country.

The £218bn figure is itself almost certainly an understatement, homes are carried at historic cost, less depreciation. I know from experience at Network Homes some homes transferred from East Herts Council had a book value below their annual rent roll.

This will be true for large-scale voluntary transfer (LSVT) homes across the country. An investor acquiring those homes would likely pay something in the region of 15 times what the accounts suggest they are worth.

“Just as there are a really broad range of investment models behind FPRPs, so are there for equity partnerships”

This means the sector has significantly more financial firepower than it routinely acknowledges, and that the question of how to deploy that firepower is one that should be asked far more urgently than it currently is.

I want to congratulate those involved in the L&G/Hyde partnership for blazing a trail and bringing these questions to the forefront. Hyde boss Andy Hulme has recognised that he doesn’t need to own everything to deliver high-quality homes and excellent services to customers, while investment strategy director Stephen McGowan has been thinking constantly about how the sector can amplify its impact.

I understand Hayley Holness, L&G’s head of investment for real estate housing, was a key force in driving L&G’s investment, and Shaun Holdcroft as project sponsor ensured execution. I’m sure we’ll hear more from all of them in due course in greater detail and the benefits of the partnership to all stakeholders.

I look forward to that but note that this model, while a great one, is just one option. Just as there are a really broad range of investment models behind for-profit registered providers (FPRPs), so are there for equity partnerships.

The range of potential partners should match the range of potential structures. We are clear that the chosen structure should be driven by the end goal, not by the preferences of whichever investor shows up first.

Some housing associations will be looking for partnerships that are fully complementary to their traditional model: they can release significant equity from their balance sheet, partner with institutional capital to hold some of their existing stock and use the proceeds to invest in new supply or in deeper place-based work in their communities. They would enhance their impact and reach, without substantial change.

At the other end of the spectrum, unlocking the greatest amount of value with the greatest level of change, is full stock transfer. All homes and their management, which as L&G’s C1 rating proves can be excellent, could transfer to the institution.

This would leave the transferring organisation as a place-based grant-giver, focused on local needs. In some cases this would be supporting the supply of social housing at scale, in other places it might be something else entirely.

“A similar model to institutional ownership could be a blueprint for the next phase of renewal that is needed”

We shouldn’t forget that the LSVT model was key to the improvement of social homes and the creation of some of the country’s largest landlords in the past.

A similar model to institutional ownership could be a blueprint for the next phase of renewal that is needed – to address decarbonisation and building safety – and could be particularly relevant for council landlords, for whom the landlord function is facing new questions with dramatic local government reorganisation plans.

For some of those councils, a stock transfer into a community-rooted housing organisation with institutional equity backing could be the best possible outcome for their tenants.

The tenants would get a landlord whose entire focus is their homes and a reliable repairs service. The council gets capital that can be invested in local priorities. The institutional investor gets a long-duration social asset that matches its liabilities and scale to demonstrate its impact.

Somewhere in the middle of these two options is the L&G/Hyde partnership, which has prompted new thinking and ways of working, deliberately engaging the best of both approaches. This is particularly valuable in my mind because it opens eyes to the full range of options available to social landlords.

In time, I think the full transfer model will appeal more to LSVT housing associations who have not yet grown beyond their place, who really know and care about their patch. They will evaluate whether a merger or transfer will create a bigger impact.

If these transfers are successful the country will get a new model, built around institutional equity, genuinely community-rooted governance and funding to meet place-based needs. Do get in touch if you want to discuss or evaluate the full range of options.

Jamie Ratcliff, deputy chair, the Housing Forum and co-founder, Place Base