In years to come, we could look back on 2018 as being a major turning point for affordable housing in the UK, or rather, the lack of affordable housing in the UK.
The US private equity firm Blackstone are at the heart of this potentially cataclysmic change in the UK housing market after acquiring a 90% stake in Sage Housing at the tail end of 2017. This move has paved the way for Blackstone to bid for, and then rent out, large blocks of apartments that property developers are obliged to classify as ‘affordable’ homes.
This may not seem like a huge issue so far, but the fact that Sage describes itself as a ‘for profit’ social housing provider should give you a clue as to the National Housing Federation’s reservations over the deal.
The pressure on housing associations is already approaching breaking point. Last year alone, the number of homes available for social rent in England dropped 11 per cent in just 12 months, nearly 40,000 fewer homes than in 2016.
The NHF represents over 900 British housing associations have already written to Sage, warning they were considering legal action over describing itself as a ‘housing association’, in breach of the Housing Associations Act. Sage has since removed this description from their website and commented that they ‘acted decisively on their request.’
Many are speculating that Sage, and Blackstone’s, plan is to hold the properties they are purchasing for five to seven years, before then selling them on at a profit, whilst also increasing the rent charged on these properties in the meantime.
This model looks to be one here to stay however, with British Land, the UK’s second-largest developer setting up its own ‘for profit’ provider last year also, and with fresh plans from Legal & General to do the same in the coming weeks and months.
The majority of Britain’s housing associations are non-profit organisations, seeking to provide affordable housing to people on low incomes and the vulnerable. They do this by developing land and buying new homes from other developers. Any profit they then make from this is then re-invested back into the properties to improve standards for existing residents, and to allow them to purchase and develop further properties.
The major concern with the ‘for-profit’ model is that all profits made, by virtue of their business model, would go back to Blackstone, rather than being invested back into the properties. Other concerns are that they would be very selective over the clients they accept, such as ones on benefits, creating a greater strain on the housing markets available to the most vulnerable and in need- which could create a real issue for councils around homelessness, if we follow this doomsday scenario to the end.
There are others however that see this as a potential positive for the market. This investment could see housing associations pushed to up their game and provide greater improvements to the homes already under their care as well in order to keep up with the appeal and demand from the new players on the scene.
Sage says the new funding provides “a new approach to affordable housing that enhances traditional models while putting residents at the centre of our business” and is partnering with developers and managers from across the residential market, both public and private, “to increase the supply of quality affordable housing across all tenures”
The social housing market is one that is very close to our hearts at eShare, as we currently provide our governance solutions to over 50 housing associations across the UK, including the National Housing Federation, so we will be keeping a close eye on this situation to see how it develops.