Housing provider calls for pension-backed affordable housing

A housing provider has called for the government to set up an affordable housing fund financed by pension scheme money.

Your Housing Group, which builds affordable and social housing, has set forward a plan for the fund in a new report written by Chris Walker, a former government economist who spent over 12 years as a civil servant in the Treasury, the Department for Work and Pensions, and the Department for Communities and Local Government.

The fund would be launched with a £2bn government seed loan and would invest in affordable housing in multiple locations across the UK.

New homes created by the fund’s capital would be delivered and managed by the housing association sector, who would offer housing scheme propositions for the fund to invest in.

The plan would include a government rent guarantee that rents within the fund could rise by CPI or CPI+1 per cent each year, for 25 years.

As a result, the fund should aim to deliver around 4 per cent net yield to pension funds. Investors — including housing associations and local authorities — would hold shares in the fund commensurate with the amounts they invest.

Walker says that the fund would be capable of financing the delivery of 30,000 affordable homes each year.

Your Housing Group says that the “radical” plan could become operational within 24 months and would eliminate the annual deficit in affordable house building and stop the housing crisis from getting worse each year due to the annual under-delivery of this stock.

As well as solving the affordable housing problem for the government, Walker also believes that the national fund would give pension schemes the chance to receive a low-risk, reliable return produced from rents and sales of stock.

Your Housing Group group chief executive, Brian Cronin, said: “The biggest scandal in housing today is the way the big developers that dominate the market are deliberately failing to deliver enough affordable homes.

"This report sets out a radical but simple approach to eliminating the deficit. I would urge policymakers to back these plans.”

Association of Member Nominated Trustees co-chair, David Weeks, has also backed the proposals, saying that affordable housing as an asset class could provide pension schemes with a much needed reliable, socially-responsible long-term investment option.

“The big catalyst needed to boost pension fund investment in housebuilding is a mechanism to collect and distribute the funds at scale, so the ideas in this report are very welcome,” he said.

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