New partnership model could fund extra 18,500 affordable homes per year, L&G white paper finds

The white paper, Delivering affordable housing growth – a partnership approach for England, argues this would be a way to meet the government target of 80,000 affordable homes per year. The analysis claims the target is unlikely to be achieved through grant funding and Section 106 homes alone due to financial constraints on the sector.

Last month, L&G inked the first deal using these principles, with Hyde selling 1,000 of its homes to two for-profit registered providers that the pair jointly own.

Through the partnership, L&G will receive income for the pension funds it manages and Hyde will use profits from the sale for developing homes and investing in existing ones, as well as continuing to manage the homes that have been sold.

António Simões, group chief executive of L&G, said: “Solving the UK’s housing challenge is a shared responsibility which requires fresh thinking and long-term commitment – pension capital has a unique role to play in this transformation.

“Our new partnership model with housing associations is designed to unlock investment at scale – accelerating the delivery of affordable homes across the country.”

This new model comes at a time when some landlords are cutting back development amid higher borrowing costs, tighter balance sheets and rising bills in order to maintain and upgrade their existing homes.

At the same time, L&G said institutional investors are looking to increase deployment of their long-term pensions capital into assets that offer stable, inflation-linked returns.

Andy Hulme, chief executive of Hyde Group, said: “This country needs a growing and vibrant affordable housing sector so we can provide high-quality homes that people can afford.

“We welcome this work. It shows the potential for scalable partnerships between institutions and traditional housing associations which can support building more new homes alongside investing in existing homes.”

Gareth Mee, chief executive officer for institutional retirement at L&G, said: “Investors like L&G are already helping to deliver social and affordable homes across the UK, and this model gives us – and other institutional investors – the ability to go further by putting long‑term pension capital to work where it is needed most, while delivering returns for our investors.

“Through our partnership with Hyde, we have already put some of the principles of a partnership RP into action. We now hope other long-term investors and housing associations will join us in adopting this model to help deliver the affordable homes the country needs.”