L&G says new partnership model could see £9bn-a-year invested in affordable housing

Legal & General says investor-provider partnerships, on the model of its recently announced deal with Hyde, could bring an additional £9bn a year into the sector.

The insurance giant is touting the Partnership Registered Provider model, in which housing associations and institutional investors create new registered providers in a joint venture as a scalable mechanism for unlocking more institutional investment.

According to a White Paper published today by L&G, every five homes transferred into a Partnership RP would provide sufficient subsidy and investment for one new affordable home.

Last month, the firm announced the first partnership of this kind with 125,000-home RP Hyde. The pair have set up two for-profit RPs together, with a seed portfolio of 1,000 homes.

L&G said that if 35% of social housing held by housing associations were transferred into Partnership RPs over the next decade, it could unlock £9bn worth of investment into the delivery of new homes designated as affordable.

Private registered providers currently own around 2.9 million units of social housing stock, making a transfer of the scale implied by L&G around one million homes.

It claims that this additional investment would enable the delivery of 18,500 additional affordable homes a year, bringing total annual delivery up to 80,000. Over a decade, this would mean the delivery of an additional 185,000 homes designated as affordable.

Under the model advocated by L&G, a housing association sells homes to another RP which is jointly owned with an institutional investor. It can then use the capital from this sale to invest in new homes or upgrade existing ones, while still retaining an interest in the original stock.

The model is intended to appeal to long-term pension capital, including from local government pension schemes, who are seeking stable, inflation-linked returns.

António Simões, group CEO, 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 £9bn 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.”

“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.”