For-profit registered providers ‘could deliver 130,000 new homes in five years’

For-profit registered providers of social housing have the potential to deliver up to 130,000 new homes over five years, Savills has predicted

The consultancy in a new report, Private Capital in Affordable Housing, predicts for-profit providers could commit up to £23bn to fund homes for shared ownership and affordable or social rent by 2026. This is based on interviews by Savills with seven of the largest for-profit providers.

The number of for-profit registered providers of housing, which are allowed under the 2008 Housing and Regeneration Act, has more than doubled from 25 in 2015 to 53 this year.

Savills said that although for-profit providers owned less than 0.2% of affordable house stock in 2020, this percentage is likely to grow as “investor appetite for affordable homes is substantial.”

Institutional investors and fund managers, including Legal & General, Blackstone, Man Group and M&G have all registered for-profit providers in the last three years. Savills said affordable housing is attractive to investors because it offers “long-term, inflation-linked income” and there is a demand for investments with Environmental, Social and Governance (ESG) credentials.

See also: Man Group’s for-profit registered provider approved by regulator

For-profit providers have to follow broadly the same regulatory standards as traditional housing associations (HAs) and they can access government grant. However the fact they are allowed to distribute dividends to shareholders means they can attract equity investment from a wider range of investors.

Savills said that to date for-profit providers have mainly focused on low-cost home ownership products such as shared ownership, with the seven biggest owning 12,227 low cost home ownership homes in March, a 9.9% increase on the previous year’s figure. The report said they looked set to grow their share of low-cost home ownership stock from 10% to 25% from development alone by 2026.

However, it said: “We expect to see FPRPs [For Profit Registered Providers] taking on more general needs rental stock as they become more established and can benefit from efficiencies of scale.”

Savills said there are “strong opportunities” for partnerships between housing associations and for-profit providers.

It said: “We are seeing interest in development joint ventures between HAs [Housing Associations] and new entrant FPRPs, to marry HA development expertise with private capital. This could include setting up a joint venture FPRP, to acquire homes developed by the HA and funded by the FPRP.”

“This is a marriage of HA development capacity and secure pipeline, with investor partner capital. With management retained by the HA, these investment partnerships can be structured flexibly to meet both partners’ objectives for returns.”

Full list of registered for-profit providers

 Source: Regulator of Social Housing