Ahead of the Affordable Housing Conference in March, we sat down with Helen Collins, who has expertly chaired the event annually since 2019, and returns to the chair for a 7th time on 5th March this year.
Helen is a Principal of Avison Young, heading up the Affordable Housing team and the Birmingham Office.
How have we seen delivery and investment models for affordable housing evolve over the last decade?
Well, let's go back a bit further. We can break delivery down into three chunk. Until the late 1970s, local authorities led delivery of affordable homes – social rent - funded through government grant. In the late 1980s, legislation changed, allowing housing associations to take on private finance to reduce the level of grant needed per new home. This change saw housing associations lead delivery for the last 30 years. However, with c.£120bn debt on the HA sector balance sheet and cost pressures from stock investment and safety needs on legacy stock, capacity for development is muted. We are now at a cross roads - for-profit registered providers came onto the scene 6/7 years ago bringing fresh capital into the affordable housing market. We need more For Profits to come in and operate at scale. We need Housing Associations to continue to develop – they have decades of expertise and some are looking to ‘go again’ setting up partnerships and their own FPRP vehicles. Local authority estate regeneration and housing supply is important and we need to find ways to unlock this. To get anywhere near 1.5m homes we need a mixed economy, with local authorities, housing associations, for-profit providers, Combined Authorities, developers and investors all playing vital roles.
Why is there so much interest from funds and investors in affordable housing?
Strong demand fundamentals combined with stable and predictable rental streams, plus the obvious societal benefits of providing affordable homes, and sector regulation make the sector an attractive investment option. There is room for value add funds during the development phase, and once built and let the stable long term income profile makes it an attractive investment for pension and insurance Core / long income funds looking for alternatives to gilts. Although the returns are not high, they are generally steady and safe over the long term. Local government pension schemes, UK DB/DC and insurance and overseas funds are all needed to support an increase in supply.
What is the attraction of setting up a for-profit registered provider?
Having an FPRP is a legal requirement of owning regulated social housing. More importantly having an FPRP vehicle and directly owning and operating stock opens up the widest range of routes to market to build portfolios at scale for operating efficiency: direct land acquisition and development, buying completed homes in bulk from developers converting market sale homes to affordable with grant; partnering with Housing Associations to acquire existing stock / development pipeline. Many of the more established funds have multiple FPRP entities to hold different types of stock, and attract different pools of capital - such as shared ownership or rented products. This allows them to manage their investments more effectively.
How are sector partnerships contributing to the delivery of much-needed housing?
Partnerships have always been crucial to delivery. Public-private partnerships have been instrumental in regenerating estates and areas. Local Authority/HA/developer partnership models are well established. For-profit providers are now partnering with volume house builders and housing associations to buy up stock at scale. We're also seeing new strategic partnerships, such as the joint venture between Legal & General and the Greater Manchester Combined Authority to build 1,000 homes. Looking ahead we see significant potential for regionally based partnerships linked to the devolution agenda and mayoral targets for housing supply. Transport and infrastructure partnerships for housing supply also offer significant future potential.
How can we achieve the government's target of 1.5 million homes in the next five years, and what is the role of affordable housing?
It's a tough target, but setting high goals is essential – as is maintaining a high degree of energy and ambition backed up by action. Changes in planning policies, such as the presumption in favour of development and harmonising need calculations, will help. It’s important to not disrupt what currently works well – relationships between Homes England, Local Authorities and Combined Authorities need to effective. Affordable housing can play a massive part in new supply – a strong grant settlement is crucial – as is flexibility to combine gap funding in high cost/low value areas. Housing associations and for-profit providers must see a stable rental income to take on more debt and raise funds.
What can we expect from the conference this year?
The conference has an incredible line up and will offer deep insight into the FPRP / affordable market in context of the wider living sector: government thinking and future opportunities for supply ; market and policy updates and I'm particularly looking forward to the fireside chat with experienced professionals who have decades of experience in the affordable housing landscape.
To hear more from Helen, and the conference panel of market leaders, please join us for the 19th Annual Affordable Housing Conference in London on 5th March. To learn more about the conference and to book your tickets please visit www.affordablehousingevent.com