For-profit housing providers to own 113,000 homes within five years
For-profit affordable housing providers have grown exponentially over the past decade and will own 113,000 homes within five years, new research has revealed.
Savills Housing Consultancy has today published a report into the growth of ‘for-profit’ providers which shows that the sub-sector has grown from just 18 organisations owning 187 homes in 2013, to 69 owning 28,164 today.
The consultancy surveyed for-profit providers about their growth plans for the report, predicting that the sector will grow by 9,300 homes by the end of 2023 and reach a total of 113,000 homes by 2028, with 100 providers in the field.
The growth has accelerated in recent years, and has more than doubled since March 2021, driven by a 131% increase in the number of general needs rented homes owned.
The providers continue to own a small proportion of stock, just 0.7% of total affordable stock in 2021/22, but have increased their share of the market by three times in the three years to 2021-22.
Three providers currently own 77% of all the stock owned by for-profit providers, the report said, but the sector is set to diversify as other new entrants build up their pipelines in coming years.
Shared ownership makes up 59% of total for-profit stock now and is projected to be 63% in five years’ time, the report said. The remainder is general needs rented housing, with a small proportion of supported housing.
Despite fears that the new providers might seek to cash in by selling the stock, Savills said that 90% of for-profits have no plans to exit the sector in the next 20 years.
The survey also found signs of increasing collaboration between traditional ‘not-for-profit’ housing associations and the ‘for-profit’ sector.
A survey of traditional housing associations revealed that 89% of housing associations would consider a partnership with a for-profit and 43% are already working with them in some way.
“Partnerships between [for-profits] and [traditional housing associations] are beneficial for both sides. [For-profits] have significant volumes of capital to deploy and seek strong ESG characteristics but lack operational and development capabilities,” the report said.
“On the other hand, [housing associations] have the in-house operational and management expertise but require access to investment capital to invest in existing stock whilst maintaining their development programmes.”
Recent deals have included tie-ups between L&G Affordable Homes and Metropolitan Thames Valley and Optivo and Sage.
“The greatest appetite amongst [for-profits] remains for newer, more energy-efficient stock but there is growing interest in acquiring older legacy stock too,” the report added.
For-profit providers include businesses established by house builders, keen to keep hold of the affordable housing they develop in private market schemes as a result of planning laws (known as Section 106 homes).
Others are backed by large institutions, such as Sage Housing – which is owned by Blackstone, one of the largest private equity firms in the world – or L&G Affordable Homes, which is backed by Legal & General.
In 2008, the Labour government at the time introduced legislation that paved the way for profit-making providers to enter the market.
But growth had been slow until the late 2010s, when major investors such as Blackstone entered the market.
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