Partnerships for good: why a diversified funding model to build homes is essential

Over the past few years, it has been well documented that, at Hyde, we’ve looked at ways of doing things differently.

We believe a diversified funding model to build homes for rent and shared ownership – incorporating grant, debt funding, partnerships, joint ventures and third-party equity investors – is essential.

We’ve embraced managing homes on behalf of others, something we’ve done for many years for local authorities, including the Islington and Brent councils, and it’s something Pinnacle, the latest addition to the Hyde Group, specialises in.

We signed our first strategic partnership in 2021, with M&G, when its for-profit registered provider, the M&G Shared Ownership Fund, bought 422 shared ownership homes.

We’ve now contracted on a further three transfers to the fund (and we’ll continue to do so), all of which we manage, ensuring customers receive a consistently high level of service.

All the money we make from the sales of these homes is, of course, reinvested in building more affordable homes.

Choosing carefully

We choose our partners carefully. They must share our ambitions to overcome the challenges we face as a sector and as a society, and must be committed to supporting our customers and communities over the long term, and to work with us to address environmental and climate challenges.

We also structure our partnerships with care, setting our parameters and building in significant protection. We want all the homes built to be owned by vehicles regulated by the Regulator of Social Housing and managed by ourselves.

But we also recognise that an earlier-stage investor may be valuable in accelerating the delivery of affordable homes. We’ve therefore structured vehicles to enable the initial investor to exit more quickly and replace them with a long-term funding partner.

An advantage of this approach is that it enables us to exert more influence over our house builder partners.

Long-term investors’ requirements are for the homes to be of higher quality and sustainability than those delivered by more traditional Section 106 routes. And this certainty of onward sale of the affordable homes also helps to de-risk our development programme.

Demonstrating impact to secure investment

A housing association’s social purpose is to provide safe, affordable homes and services to its customers and communities, who can be some of the most vulnerable in society. Fundamentally, being able to measure our impact, alongside customer feedback, helps us to improve the homes and services we provide.

And, from an investor point of view, non-financial factors such as the sustainability of an organisation and its ethics are a key part of investment and partnering decisions. It also helps partners to understand one another better.

This is one of the reasons why, four years ago, we began reporting on our environmental and social impact, using customer stories alongside the numbers. This allows us to demonstrate the breadth of what we do as a housing association and the real-life outcomes for customers.

Like many organisations, we developed an environmental and social impact framework, using a set of metrics under the themes of environment, social and governance.

We’ve set annual and long-term targets and objectives for each metric, which tie in with our strategic goals, because it’s important we hold ourselves to account, as well as to our customers and partners.

Last year we updated our Value of a Social Tenancy (VoST) model, which once again showed just how much the economy and society benefits from social housing. Each of our social tenancies generates an annual value of at least £26,965, and as a whole, our social tenancies generate at least £640.5m a year.

Investment is crucial to help us meet our ambitions

We know we can’t build the affordable homes the country so desperately needs by ourselves – it must be done in partnership with others.

Holding ourselves to account, while demonstrating the positive impacts social housing has, will help us to choose partners whose values and ambitions match our own and attract that investment.

Ultimately, alongside offering sound investment choices for funders, these partnerships enable us to fulfil our social purpose and to meet our long-term goal of providing safe, affordable and comfortable homes, in thriving communities, which people are proud of.

Andy Hulme, chief executive, Hyde Group