Large London housing association to set up for-profit provider
A large London-based housing association has revealed plans to set up a for-profit registered provider to harness capital from pension funds seeking ethical investments.
Hyde Group has submitted an application to the Regulator of Social Housing (RSH) to create a for-profit social housing provider, which the association says forms part of its long-term strategy to collaborate with government, public and private sector partners, and institutional investors.
The 55,000-home landlord is the first traditional housing association to announce plans for its own for-profit.
For-profits have grown significantly in number over the past two years, with several developers and investment firms registering social housing arms with the RSH.
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Peter Denton, chief executive of Hyde, told Inside Housing: “There’s increasing consensus that the level of capital the sector needs is high and is arguably more than the sector has.
“We are being open about our belief that we need to engage with appropriate ethical capital that will allow us to deploy a greater amount of our own capital towards existing homes.”
He suggested that the £12bn from the Affordable Homes Programme would not be enough in light of pressures brought by COVID-19, adding that this means “there’s need, in a mixed funding model, to look elsewhere”.
Hyde announced last month that it would be including American bank Wells Fargo and the National Australia Bank as strategic funding partners as part of its mixed funding model.
Mr Denton noted that environmental, social and governance (ESG) related investment is the “fastest-growing form of ethical investment” with $2tn of capital being invested in these areas this year.
He added: “We believe that it is appropriate and manageable to bring pension fund capital into our sector to support what we are doing but we are very conscious that we need to do that in the right way.”
He said that ESG investors will provide the majority of the capital for the for-profit arm but that Hyde will still have an interest in it and apply the same governance and viability considerations as for its four existing not-for-profit registered providers.
The group hopes to have the for-profit up and running before Christmas, subject to the RSH’s approval.
Mr Denton said: “We believe that there is very little economic yield in the world today and the attraction to getting investors a broader ESG return is very, very appealing.
“I think there will be quite a lot of organisations that will be looking with interest to see how this works out.”
