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Housing associations should be open to private equity investment, say sector leaders
Housing associations should be open to private equity investors and other new types of lending as long as risk sharing can be agreed, leading sector finance figures have said.
Speaking at Homes UK, Waqar Ahmed, group finance director at L&Q, and Peter Denton, chief executive of Hyde, agreed that private equity has a place in social housing if used in the right way.
Mr Ahmed told delegates: “I think there is a conversation to be had with government about more grant but I do think there needs to be more conversation about other types of investors as well, perhaps private investors but at terms and conditions that work.”
He added: “I’m not opposed to private equity so long as the risks and rewards are shared in an appropriate way and fundamentally that means the equity investor taking on risk.
“Equity investors have to accept that the cost of building a scheme is the cost of building a scheme and the returns are whatever social rents generate from that.”
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Private equity has been touted as a possible replacement for a lack grant as housing associations look to grow businesses, but the concept has also been met with scepticism in some quarters.
Concerns around private equity entering the UK social housing space are due partly to the fact that some profit would be diverted out of the sector, whereas housing association surpluses are currently entirely reinvested into new homes.
Mr Ahmed said private investors should be involved in developments from the early stages and remain involved throughout.
Mr Denton, who announced earlier in the year that Hyde would be creating its own for-profit registered provider, also argued that private equity had a place within social housing.
“There’s demand for institutional capital, there’s supply of it and I think it can be controlled in the right way,” he said.
Mr Denton added: “I do feel very strongly that any investor that is coming into social housing has to be as regulated as the not-for-profits.”
He said Hyde “may well bring investors in” when it has created its for-profit provider and said Hyde will focus on managing the governance of the organisation.
Mr Denton added: “The first thing we will go public on is a shared ownership arrangement,” adding that operating margins on the tenure are “incredibly high”.
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