Can ‘for-profit’ providers rescue affordable housebuilding?

Deanston Wharf - L&G Affordable

With traditional RPs increasingly constrained by stock condition problems, does the new breed of ’for profit’ housing associations provide the answer for social housing new build?

Earlier this month saw a raft of rating agency downgrades of the finances of some of the UK’s most prolific developing housing associations, amid rising costs and constrained rents. A “perfect storm” is how Trowers & Hamlins partner Rob Beiley describes the confluence of issues facing traditional registered providers. Hampered by mountainous stock condition problems, from fire safety and damp and mould to achieving the net zero, development plans are being cut back as their priorities are forced sharply away from new build.

Many see hope for new build affordable housing, however, in the form of the new breed of “for profit” registered providers (RPs).

Permitted by the 2008 Housing and Regeneration Act, the social housing regulator lists just 69 profit-making housing associations on its 1,600-strong list of registered providers. But some of these organisations, such as Sage and L&G Affordable Homes, now count among the biggest builders in the social housing sector, and research by Savills last year predicted the “for profit” sector will grow seven-fold in just the next five years.

With some of the biggest UK and global financial institutions such as Blackstone, L&G and M&G investing in for profit RPs, the idea is gaining traction that this sector may be able to step in and deliver the desired increased in affordable housing supply if traditional landlords are unable to.

But the last year has also seen setbacks. Two for profit RPs – Auxesia Homes and the much larger Heylo Housing – have been judged by the Regulator of Social Housing (RSH) to have failed the regulatory standard. These failures have contributed to lingering doubts among some as to the appropriateness of bringing in profit-making companies to a sector traditionally populated by charitable organisations. So, with bulging housing waiting lists showing the desperate need to increase affordable housing delivery, can “for profit” RPs ride to the rescue – and what are the implications if they do?

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