Equity Investment in Affordable Housing

For-Profit Registered Providers have continued to grow their portfolios in recent years. They now own an estimated 43,100 homes and this could exceed 150,000 homes by 2030. Alongside continued expansion, the sector is maturing, with increasing interest from a variety of investors and sources of capital. There are a range of approaches emerging amongst investors. Some are choosing to register new FPRPs, some are purchasing existing entities and others are lodging funds with investment managers who already have a platform in the sector.

There is a clear ambition from investors to scale up their portfolios within the sector and create secure, long-term income streams. At a time where housing associations are increasingly looking inwards and allocating resources to their existing homes, this investment could be really beneficial in helping to meet demand for affordable housing.  This could either be by investing directly in new homes or by taking on investment into existing homes and releasing capacity for housing associations, or as we are finding, both of these.

But there are barriers to reaching these ambitions, largest among them the level of funding subsidy available from Government to help build affordable homes. Alongside this, a lack of clarity on some policy issues as well as on the ability of landlords to increase their rents at least in line with inflation appear to be the main reasons for caution from investors.

If the Government is to meet its target of delivering 1.5 million homes over this parliament, there will need to be a significant increase in affordable housing delivery. It will be essential to put in place a policy framework within which fund managers and investors have the confidence to invest over the long-term.

Equity investment and housing association funding models are not, and have never been, mutually exclusive.  The two groups have already begun to develop meaningful partnerships to support the delivery of new homes.  Our research suggests that the range of funding and delivery models will continue to develop and diversify, and a key impact for the traditional housing association sector will be diversification in the range of partnerships and partnership models.

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