Investment giant aims to double affordable housing fund this year
Investment giant Octopus aims to double the size of its affordable housing fund to £485m this year.
Jack Burnham, head of affordable housing at Octopus Investments, told Inside Housing the fund had raised £242.5m since launching in November 2023 and “we’re optimistic we can raise a similar number over the next 12 months”.
The fund, which recruited Georgia Kirby-Watt as operations director from Grainger in June 2024, has a long-term target to raise £1bn over the coming years.
“Affordable housing is resonating with investors at the moment,” Mr Burnham said. “It’s got that nice blend of defensive, resilient income and very measurable social impact.”
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The fund’s investors currently consist of six local government pension schemes alongside £10m from impact investor Better Society Capital.
“But we are seeing some different interests,” Mr Burnham said. “We’re talking to some endowments, some international capital, some other pension funds.”
Octopus deploys the capital through NewArch Homes, its for-profit provider acquired in 2022. The for-profit had 400 homes completed or under construction by the end of 2024, two-thirds of which are for social or affordable rent and one-third for shared ownership.
Mr Burnham said he expected to grow the NewArch pipeline to 1,000 homes by the end of 2025 while maintaining the mix of tenures.
NewArch contracts the management of its homes to housing associations and now has “four or five” such arrangements, including with Flagship Group. Pinnacle Group has also taken on management of 59 NewArch homes across Peterborough and Exeter.
Mr Burnham said he was set to announce another formal partnership with a housing association “in the next couple of weeks”. The deal will encompass some existing homes and some under development, he added.
NewArch has agreed terms for its first ‘zero-bills’ site, which will use a smart tariff pioneered by its sister company Octopus Energy and include heat pumps, solar panels and battery storage in new homes. More details will be announced in spring, Mr Burnham said.
The for-profit has no dedicated retirement properties yet, but Mr Burnham said he had “sites on the radar” which include older people’s housing and was “actively looking” for opportunities in that sector. However, no more than a third of NewArch properties will be for later living, he added.
Due to the nature of its local government investors, which are looking for stable returns, Mr Burnham said direct development was “probably not as much of an active priority” for NewArch.
However, deals such as its 180-home stock transfer with Golding Homes, completed in March 2024, helped the housing association recapitalise and “take on a couple of new development projects”, he said.
Alongside buying up Section 106 homes, grant-funded additionality was “a big part of what we’d like to do”, he added. This includes bulk acquisitions from house builders of stock that was intended for private sale. “Can we take some grant funding and make that affordable housing?” he asked.
Asked how the for-profit ensured it took on the right quality of Section 106 homes, Mr Burnham said NewArch has focused on low-rise “single-family accommodation” where there was “less to go wrong than there is in an 18-storey block of flats”.
“We’ve also got lots of development expertise in-house, so we’re pretty hands-on in the development stage and the delivery phase to make sure the quality’s there,” he added.
Mr Burnham has an ambition to deploy cash in investors’ geographical areas. Devon’s local government pension scheme contributed £40m to the affordable housing fund in July and NewArch completed its first homes in Devon just before Christmas.
“It’s a minority of what we do [but] it seems to be resonating quite nicely,” he said.
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