Investment strategy
Our thematic strategy focuses on investment in our network of highly regulated UK Housing Association’s affordable housing and retrofit programmes to benefit from capital gains, with a defined exit and a secure long-term, index-linked income.
The sector is very attractive for investment to help meet capital shortfalls; with Net Zero and Decent Homes Standard legislative requirements and deadlines, a systemic undersupply and demand imbalance, inflation-hedging characteristics and low risk profile. It further benefits from cogent ESG attributes in its social impact, improving tenant welfare, reducing fuel poverty, and helps decarbonise the UK’s housing stock, which is responsible for 16% of total UK carbon emissions.
Sector investment is sustainable, scalable and can help ensure fiduciary duties are fulfilled. The high level of regulation provides strong safeguards and incentives that properties are managed with the highest standards of governance, financial viability and resident welfare.
Investment benefits
- Core plus/value add investment strategy
- Income strip: Securitised income, index-linked
- Long investment duration profile (30yr – 50yr)
- Solvency II compliant
- Low/moderate risk, with attractive returns for risk level
- Highly regulated sector: Credit, governance and welfare resident ratings
- Rigorous portfolio selection: All property to be retrofitted have stock condition reports in advance of acquisition, with estimated retrofit costs and timescales
Investment overview
Long-dated liability matching
Through these long-term assets, investors can benefit from a closer match to their liability and duration needs.
Predictable cash flows
Housing Association is the tenant, on long FRI leases delivering strong long-term cash flows.
Inflation hedge
Rental income linked to Consumer Price Index, or ‘collar & cuffed’
Diversification
The risk profile of long-lease property is different from traditional real estate allowing investors to access varied types of revenue.
Lower risk
Housing Associations have good Credit rating and governance levels
Highly regulated
UK Government regulated sector
Market dislocation and overview
Supply/demand & legislative requirements: To achieve net zero by 2050, 29 million UK homes must be retrofitted. Currently 1.2 million properties in the social housing sector that are EPC band D or below. Properties must be retrofitted to EPC band C or above to comply with 2030 Net Zezo legislation, and enable the properties to continue to be tenanted
Capital requirement: Housing associations have capital shortfalls due to grant funding cuts, £10bn fire safety regulation, £110bn cost for retrofit
Cogent ESG: Decarbonisation of housing, helping reduce fuel poverty, improving physical and mental health with better quality sustainable homes
Established private credit market: Housing associations have increasingly turned to the debt capital markets to meet their long-term funding needs. Total housing association debt was £99.7bn in 2024
ESG investment
Investment in affordable housing retrofit programmes can transform communities with energy-efficient, future-ready homes. Improving resident’s living conditions by reducing fuel poverty, inequality and helps decarbonise the UK’s housing stock.
Retrofitting homes can also have a major impact on the NHS. Over seven million UK households are affected by damp and mould from poorly insulated homes, costing the NHS over £2.5 billion each year from resultant health conditions. The National Energy Action’s report, ‘Every home should be a warm and safe place’. revealed that ’for every £1 spent on retrofitting a fuel poor home, it saves the NHS 42p’.
It’s great for business
Research by U.K. insurer L&G revealed that ‘71% of respondents would feel more positive about their pension provider if they knew they were investing pension money in affordable housing’.
