Housing associations eye bulk sales of shared ownership stock to private investors to boost cash
Housing associations are looking to offload shared ownership stock to private bidders in a move to free up cash, industry experts have said.
Inside Housing has heard from valuers and lawyers who said that rising costs linked to fire safety works and net zero carbon targets are leading housing associations to consider large-scale disposals of their shared ownership stock.
Charles Cleal, director of affordable housing at JLL, told Inside Housing that the company has advised on three different shared ownership transactions already this year. The deals ranged in size from more than 3,000 homes down to just over 100.
He added: “We are also discussing a number of further portfolios with our clients and are likely to see transactions increase over the coming year.”
Mr Cleal’s comments come after investment giant BlackRock last month loaned for-profit provider Heylo Housing more than £300m to buy up 3,000 of its shared ownership properties.
Helen Collins, head of the affordable housing consultancy team at Savills, also said there is growing interest in this type of deal.
“With shared ownership assets, I think the reason people are starting to look more closely at this now is to release capital for investment in new homes and decarbonisation,” she explained.
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Ms Collins and Mr Cleal both said that disposals are partly a result of shared ownership properties being inefficient to charge as loan security. This is because incomes from these properties are less predictable. While there is a rent element, banks and other lenders cannot have certainty over when receipts linked to staircasing will be received.
In addition, affordable housing is seen as an attractive option for investors who are mindful of environmental, social and governance (ESG) factors. These investors also find shared ownership attractive because it offers both retail price index-linked (RPI) rent increases as well as some exposure to house price growth.
“There is no shortage of investor interest and appetite and that’s partly because of the ESG credentials associated with affordable housing,” said Ms Collins.
“It’s a new thing and it is something that is going to build up,” said Neil Toner, head of real estate at law firm Devonshires.
He said that investors view affordable housing as a secure investment while registered providers have become “more relaxed” about who they are doing business with.
Ms Collins agreed that the process of selling shared ownership units to investor-backed for-profits is becoming more familiar to housing associations and said “it is a market that is here to stay”.
“More and more investors have looked at the affordable housing sector and got comfortable with it and started setting up their own for-profits,” she said.
Her comments align with recent announcements from the Regulator of Social Housing that it has received applications from around 50 organisations looking to set up for-profit housing associations.
According to Ms Collins, Savills’ social housing clients have made more enquiries looking to understand who potential investors would be.
She added that registered providers are diligent in who they sell to and it is recommended that they conduct leaseholder consultations before any sale.
Mr Cleal said it is “vital” that shared ownership customers continue to receive a good level of service and this meant that investors and those landlords selling stock were often keen for the association to retain management for an appropriate fee.
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