Pension investment in affordable housing is being constrained by a series of practical barriers, rather than a lack of capital or willingness to invest, a report from Nest Insight has shown.

Its research, which explored whether money from pension funds could help build more social and affordable homes, highlighted two ‘parallel crises’ in the UK housing system.

These were a crisis of home ownership for those who cannot afford to buy a house, and a crisis of options for people living in poor quality, unsuitable, unaffordable, or overcrowded rental properties.

Its report focused on the latter crisis, and noted there was an emerging view that pension schemes and institutional investors could play an important role in tackling the challenge.

Nest Insight’s research argued that affordable housing can offer stable and secure long-term returns, alongside positive social impact and member value alignment.

However, the primary constraints to investment were identified as a series of practical barriers, including complex and competing funding pressures for housing providers, competing demands on pension fund capital, and the need for new funding models and innovation.

Additional barriers outlined in the report were challenges around the suitability of homes and the availability of viable supply, the alignment of values and objectives between investors and housing providers, operational constraints, and uncertainty around the stability of future policy and regulation.

“Our conclusions are clear: creating the right conditions to unlock investment will depend on transparent, collaborative, long-term partnerships between investors, housing providers, local and central government bodies,” Nest Insight stated.

“It’s complex and important work is already underway. But were these partnerships to evolve, experts from both the housing and pension sectors felt there is considerable opportunity for long-term capital to provide stable returns for investors and savers, while also helping to provide safe, decent and secure homes for those with the greatest needs.”

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