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Research estimates the number of investor-owned affordable homes could more than double within three years

News20.07.232.15 PM by Stephen Delahunty

A rise in investors targeting the affordable sector will see private institution-owned housing account for around a quarter of new delivery by 2025, according to new research.

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Research by JLL suggests that the number of investor owned affordable homes could more than double within three years #UKhousing

Consultancy JLL’s Affordable Housing 2023 report found that investors owned 26,400 affordable homes at the end of 2022, of which 85% were owned by just four providers.

However, increases in private capital commitments through for-profit registered providers will see this market grow 120%, reaching 58,100 homes within three years, according to investor projections and current delivery rates.

This is almost double the projected rate (65%) of growth in residential developments containing more than one home. Broader investor stock is set to increase by 104% to 258,100 homes.

A total of £35bn of investment in private build-to-rent acquisitions was tracked as part of the report, against just £4bn in affordable housing. This has seen affordable housing account for just 10% of private investment in rental housing, however this share is expected to rise.

Richard Petty, head of affordable housing at JLL, said: “Institutional capital has a growing part to play in affordable housing delivery. We have seen a significant increase in institutional investment across all the living sectors, spanning PRS, multi-family, single family, specialist supported and mainstream affordable.

“The sector needs to embrace that and make the most of investors’ willingness to work in partnership. Together, we cannot let the possible imbalance of supply and demand go on much longer without making the sort of changes to the model that will be necessary to deliver real increases in supply.”

The report also looked at the issue of unmet demand across the sector. It estimates a potential market of 6.2 million households in England, of which just two-thirds are in social rented households, leaving 2.2 million that do not have the social housing they need. The number compares to 1.2 million households on local housing registers.

As a result, that unmet demand leaves households reliant on temporary housing, homeless or hidden households, and the private rented sector.

Across the UK, that demand could rise to 7.5 million households, making affordable housing the UK’s largest potential market for living investment.

Currently the institutional share accounts for just 0.4% of the total sector. By 2025 this is set to rise to 0.8%, still a small minority, which JLL predicts has significant potential for growth.

In addition, the past decade has seen some £99bn paid in housing support to social rent tenants in England, with a further £61bn to private landlords, according to analysis of English Housing Surveys.

This total figure of £160bn in housing support could have funded around 2.5 million new affordable homes if housing support had been directed to affordable grants, based on pricing in the Affordable Homes Programme between 2021-26.

Emma Rosser, research associate at JLL, said: “Investors are diversifying from city centre flats to a range of tenures and housing types. While there are challenges to entry, the scale of demand is higher than any other living sector, and the current pressure on household finances will only increase this.

“Institutions are responding to this call to action and have laid the foundations for long-term investment at scale, also supporting broader social impact goals.”