L&G’s affordable homes boss on acquisition strategy and investor values

“It’s organisations putting together packages of mixed portfolios and then looking for organisations who might be interested in not just a single transaction, but a series of transactions over time,” he adds.

“We’ve spent most of our time where the largest portfolios are, which is in that central bucket of having a mixed portfolio of stock.”

However, he says the company is not looking to purchase one group specifically, and has the capacity to help those with new build pipelines.

“We have the capability and the investment strengths to be able to work to solve some of the biggest retrofit challenges,” Mr Holdcroft says, but he recognises that organisations need government grants to “be able to make that work”.

L&G’s affordable homes business is made up of 12 separate entities, nine of which are for-profit providers registered with the Regulator of Social Housing.

“We have the capability and the investment strengths to be able to work to solve some of the biggest retrofit challenges, but organisations need government grants to be able to make retrofit work”

Across these 12 entities, L&G reported total profits of £17.7m last year and just under 1,400 homes added to their portfolios. According to an Inside Housing survey, this makes L&G England’s third-largest for-profit affordable housing entity.

L&G’s global asset management division is separate to this, and includes build-to-rent, single-family housing, affordable housing, purpose-built student accommodation and later living.

Mr Holdcroft wants to use the asset management division as a method of drawing third-party investors into the affordable housing sector.

“[The asset management division] represents over £1tn worth of investment on behalf of third-party clients. It’s an incredibly powerful vehicle, which L&G has built over many years.

“The affordable homes business is still relatively young, and it’s just getting to the point of deploying £1bn worth of capital.”

He says the aim is to “think about how we can use our best-in-class affordable housing operations business [alongside] the investment available through our colleagues in the asset management division”.

In practice, this has included raising more than £500m from local government pension funds over the past year, according to Mr Holdcroft. In January, the Greater Manchester Pension Fund invested £100m in L&G’s northern England-specific affordable housing fund.

Mr Holdcroft said that L&G is also looking at potential investors interested in stepping into the affordable housing space. But any potential investor would need to be aligned on values to protect L&G’s customers as well as the social housing it manages.

These values include “the length of time over which you view risk and the type of return you want from your investments”.

Mr Holdcroft also emphasised the importance of a “custodian” attitude when it comes to the affordable housing stock, because it is “an incredibly valuable public asset for the good of our society”.

“Those [affordable homes] will outlive our time as leaders,” he said. “They will serve the needs of many generations of people in this country, but serving them, and serving them well, needs people who are effective communicators, and are ambassadorial in presenting the case for the social housing sector in this country and ensuring that the significant benefit it can make to people’s lives is recognised.

“We need investment partners who are aligned with that and see the world in a similar light. Otherwise, you end up with a mismatch of values, and I just have no interest in that becoming part of the dynamic.”

“We need investment partners who see the world in a similar light”

Mr Holdcroft thinks that L&G has an important role to play when the sector is facing multiple pressures on its finances.

“We’ve already delivered over £1bn worth of capital into the sector. But we’re also looking to buy and help to tackle the challenges of improving existing homes in the sector.

“This will help registered providers to recapitalise, but also speed up the rate at which we’re able to offer customers warmer, drier, safer homes to live in right across the sector.”

Reflecting on his 23-year career, Mr Holdcroft outlined a key lesson he has brought into this new role: “For the majority of social housing customers, what they are fundamentally asking us to do is provide a good-quality home at a price that they can afford, and to deliver a set of services to them which create the minimum amount of inconvenience to their lives.

“My ambition from here is to make sure that we can continue to build on that and see much more of that investment flow through so that we can support many more customers.”