L&G has published a new whitepaper that sets out a new solution to unlock long-term institutional capital and accelerate the delivery of affordable housing across England.
The insurance company is calling on institutional investors, housing associations and the government to back what it calls a scalable solution designed to re-capitalise the social housing sector and increase delivery without additional cost to the taxpayer.
The whitepaper, ‘Delivering Affordable Housing Growth; a Partnership Approach for England’, sets out L&G’s new partnership investment model of Partnership RPs, which it says is a repeatable framework that will bridge the gap between long-term institutional capital and affordable housing delivery.
Partnership Registered Providers are joint ventures between a housing association and an institutional investor. Under the model, a housing association sells homes to the joint venture and uses capital from the sale to build new affordable homes and upgrade existing stock. All homes remain within the regulated social housing sector, with rents and resident protections unchanged and the condition of the homes improved.
L&G says that the partnership model will be an option for housing associations with suitable stock and growth ambitions, alongside institutional investors seeking long-term, inflation-linked income. The standardised approach is designed to channel more pension and insurer capital into the sector, helping housing associations rebuild their balance sheets, improve existing homes to benefit occupiers, and increase affordable housing delivery.
Analysis in the whitepaper shows that, for every five homes transferred into a Partnership RP, the model can create capacity to deliver at least one additional affordable home, over and above existing delivery and at no cost to the UK Exchequer.
If adopted widely, L&G says that new affordable home delivery could reach up to 800,000 in a decade without expanding the government’s grant programme. Delivering this volume of homes without Partnership RPs would require over £2billion a year in additional government grant funding.
Last month, L&G announced a 50:50 partnership with Hyde Group, a housing association that owns and/or manages 125,000 affordable homes, putting some of the principles of the Partnership RP model in action. The joint venture launched with an initial portfolio of over 1,000 affordable homes.
António Simões, group chief executive officer 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. If adopted widely, this approach could mobilise over £9billion of net new investment every year and support the delivery of more than 80,000 affordable homes annually, all without adding pressure to the public purse.”
Gareth Mee, CEO of 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.”
Andy Hulme, group chief executive of the Hyde Group, commented: “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.”
