These are welcome ambitions, but they heighten the capacity challenge precisely when many providers are approaching borrowing limits. Their not-for-profit structures mean they cannot access other forms of capital, such as equity, creating a bottleneck right at the moment when the country needs to accelerate affordable housing delivery and stop the net loss of genuinely affordable tenures.
This is where responsible, long-term institutional investment has an important role to play.
Institutionally backed registered providers, often known as for-profit registered providers, are private organisations that have registered with the Regulator of Social Housing to provide affordable housing. Unlike traditional housing associations, which are not-for-profit, they can distribute returns to investors while operating within the same regulatory framework and meeting the same requirements around tenant outcomes, governance and financial viability.
When institutionally backed registered providers first entered the sector, there was some scepticism about the role they could play, with concerns that investor-backed providers could compete with or displace housing associations. A decade on, the reality is that they are not replacing housing associations, but working alongside them, bringing additional capital, sharing expertise and unlocking developments that might otherwise not come forward.
“It’s becoming clear that the future of affordable housing delivery will be shaped by collaboration between different providers, not competition between them”
Real Estate:UK represents organisations across the affordable housing sector, but the distinction between these models is increasingly less clear-cut. Traditional registered providers are entering partnerships with institutional investors, and many are exploring or establishing their own institutionally backed registered providers. It’s becoming clear that the future of affordable housing delivery will be shaped by collaboration between different providers, not competition between them.
Our new paper, Unlocking affordable housing: The role of private investment in meeting the UK’s housing need, examines how institutional investment can complement the vital role of traditional providers and help close the gap between housing need and delivery.
The case for institutional investment is straightforward. Investors such as pension funds and insurers are looking for stable, long-term assets that generate predictable returns over decades.
Affordable housing offers exactly this, while also delivering significant social value. Crucially, institutional investors can provide equity as well as debt, unlocking additional capacity where traditional providers face financial constraints.
This additional capital can support affordable housing delivery in several ways: funding new developments directly, creating new partnership models with traditional registered providers, and enabling providers to recycle capital from existing stock into further development. By stepping in with equity, private capital can help traditional providers rebuild and expand capacity, ensuring that newly constructed units are not simply offsetting homes lost to open-market disposals.
However, policy has not always kept pace with how the sector has evolved. Where funding rules, grant arrangements and regulatory approaches unintentionally create barriers between different delivery models, opportunities to build more affordable homes can be lost, to the detriment of those who need them.
The government has taken an important first step through its long-term funding settlement.
The next step is evening the playing field for all registered providers, ensuring that public investment is used to maximum effect by attracting additional responsible capital.
This is not a choice between public funding and private investment, and the scale of the housing challenge demands a pragmatic approach. If we are serious about delivering and preserving the affordable homes communities need, we must unlock every available source of capacity and investment.
Jordan McCay, policy officer, Real Estate:UK
