Elthorne Park is an affordable housing renovation being carried out by Islington Council
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Despite the Chancellor’s pledge of an extra £1.3 billion to fund new homes, councils in London have warned that this increase will not be enough to build a required 80,000 affordable homes a year.
For-Profit Registered Providers (FPRPs) are helping to ease the pressure to meet this target on new affordable homes in the capital. FPRPs are housing associations funded by private equity, rather than government grants.
Ahead of the Budget, London Councils revealed that they spend more than £90 million a month on temporary accommodation. Having overspent by more than £200 million in the last financial year, most boroughs are already forecasting further overspend this year.
While FPRPs are gaining popularity in the short-term, this reliance on equity markets to build homes has not kept up with the demands for affordable housing.
Not-for-profit housing sector is struggling to build homes
Free-market investment is being welcomed in the industry as equity firms can subsidise affordable housing contracts alongside their regular housing projects.
But not-for-profit contractors are struggling to fund these ventures because of rising costs and a host of bureaucratic policy demands, a spokesman for the Home Building Federation told City London News.
The government’s latest Affordable Housing Monitor expresses concerns over the “unique delivery challenges” that London faces: “Brownfield sites, high land costs…has increased prices and challenged the viability of many developments.”
The report adds that housing associations and councils are worried about “reduced forecast rental incomes” adding greater pressure on their homebuilding budgets.
The Home Builders Federation said that state and grant-funded contractors are not signing as many planning permissions, while FPRPs have discovered a legitimate market in affordable housing.
Investors see the social value in affordable homes – ‘but still want a return on investments.’
According to Savills, FPRPs are projected to own 113,000 homes by 2028 in the UK – an increase of 401% from 2023. Where there were only 69 FPRPs in 2023, Savills forecasts that there will be around 100 within the next four years.
This market is concentrated with a few dominant companies. Savills reports that “the three largest FPRPs own 77% of total FPRP stock.”
In May 2023, the developer St. Arthur Homes wrote positively about the shift in who was building new affordable homes: “Given that social housing is a regulated sector… it is a perfect time to acknowledge that equity is making the sector more financially robust – and should be welcomed.”
A Savills survey of investors looking at the affordable housing market appears to show how they view it as a responsible investment – 60% say social value and impact is very relevant, and 59% say that Environmental, Social and Governance is very important.
While this seems promising as a way of attracting responsible investors looking to create social change, Savills emphasises that “they do still demand a return on their investments.”
There are remaining doubts as to whether the affordable housing market will be steered by equity looking to satisfy shareholders, or whether affordable housing will maintain the priority of helping people live in a home.
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HeadlineAffordable housing in London increasingly funded by for-profit equity firms
Short HeadlineFor-profit equity funds London affordable housing
StandfirstCouncils struggle to fund affordable housing projects in the capital as costs rise
Despite the Chancellor’s pledge of an extra £1.3 billion to fund new homes, councils in London have warned that this increase will not be enough to build a required 80,000 affordable homes a year.
For-Profit Registered Providers (FPRPs) are helping to ease the pressure to meet this target on new affordable homes in the capital. FPRPs are housing associations funded by private equity, rather than government grants.
Ahead of the Budget, London Councils revealed that they spend more than £90 million a month on temporary accommodation. Having overspent by more than £200 million in the last financial year, most boroughs are already forecasting further overspend this year.
While FPRPs are gaining popularity in the short-term, this reliance on equity markets to build homes has not kept up with the demands for affordable housing.
Not-for-profit housing sector is struggling to build homes
Free-market investment is being welcomed in the industry as equity firms can subsidise affordable housing contracts alongside their regular housing projects.
But not-for-profit contractors are struggling to fund these ventures because of rising costs and a host of bureaucratic policy demands, a spokesman for the Home Building Federation told City London News.
The government’s latest Affordable Housing Monitor expresses concerns over the “unique delivery challenges” that London faces: “Brownfield sites, high land costs…has increased prices and challenged the viability of many developments.”
The report adds that housing associations and councils are worried about “reduced forecast rental incomes” adding greater pressure on their homebuilding budgets.
The Home Builders Federation said that state and grant-funded contractors are not signing as many planning permissions, while FPRPs have discovered a legitimate market in affordable housing.
Investors see the social value in affordable homes – ‘but still want a return on investments.’
According to Savills, FPRPs are projected to own 113,000 homes by 2028 in the UK – an increase of 401% from 2023. Where there were only 69 FPRPs in 2023, Savills forecasts that there will be around 100 within the next four years.
This market is concentrated with a few dominant companies. Savills reports that “the three largest FPRPs own 77% of total FPRP stock.”
In May 2023, the developer St. Arthur Homes wrote positively about the shift in who was building new affordable homes: “Given that social housing is a regulated sector… it is a perfect time to acknowledge that equity is making the sector more financially robust – and should be welcomed.”
A Savills survey of investors looking at the affordable housing market appears to show how they view it as a responsible investment – 60% say social value and impact is very relevant, and 59% say that Environmental, Social and Governance is very important.
While this seems promising as a way of attracting responsible investors looking to create social change, Savills emphasises that “they do still demand a return on their investments.”
There are remaining doubts as to whether the affordable housing market will be steered by equity looking to satisfy shareholders, or whether affordable housing will maintain the priority of helping people live in a home.
