Privately Social

The housing world is so awash with jargon that it is often difficult to understand what is going on. The slow but steady movement of private companies into the social housing sector has been lost in that jargon. The social housing sector is regulated by an organisation called the Homes and Communities Agency (HCA) which trades under the name Homes England (HE), the regulatory function is called the Regulator of Social Housing, or RSH (pronounced rosh). The HCA was a successor to the Housing Corporation and was established by the Housing and Regeneration Act 2008. 

Organisations registered with the regulator are called Registered Providers (RPs) and there are three main types, Local Authorities, non-profit organisations (which are called Private Registered Providers and are mainly housing associations and almshouses) and profit-making organisations and profit making organisations (called FPRPs for profit registered providers). This creation of ‘for-profit’ registered providers is one of the innovations of the 2008 Act and brought a completely new type of organisation into the social housing world.

Last summer Savills published an analysis of FPRPs. These organisations were almost insignificant until 2018, since then there has been a rapid, almost exponential, growth in the homes they control to almost 30,000 homes. Savills predicts that by 2028 that number will pass 100,000 homes.

These for-profit organisations, perhaps unsurprisingly, are mainly interested in new homes with their primary focus being shared ownership, at the lower risk higher return end of the sector. These have been bought either directly from developers as part of their planning S106 requirements or from housing associations looking to consolidate their geography or to increase their liquidity.

Legal and General Affordable Homes, strapline “Improving lives through inclusive capitalism” has the mission to “Become the leading developer and operator of affordable homes in the UK” has already passed 2,000 homes and has achieved the highest V1/G1 (viability and governance) rating from RSH. They aim to have 10,000 homes by 2027. Almost all FPRP are subsidiaries of other companies as starting in housing requires patient capital as there is a significant lag between incurring costs on development and delivering a return, for example Square Roots set up by property company London Square (mission “to provide an aspirational solution to those who need to rent and live in London”) posted a £800k loss in its first year of operation. The fastest growing FPRP is Blackstone backed Sage Homes (“Homes to build lives in”.), in 2022/23 it delivered almost 3,500 new homes taking its total to over 10,000.

As traditional housing associations find themselves shifting investment to improve an ageing portfolio the for profit sector is likely to become more significant as developers of new affordable homes.