THFC’s Priya Nair on leveraging legacy and lessons from infrastructure to free up sector capacity

What’s in a name?

Zooming out from specific solutions, why is there a need to formally label the sector as ‘infrastructure’, Social Housing asks.

“By elevating it, you’re recognising the scale of the problem. So it becomes even more strategic to not just the public sector, but the private sector as a whole – to see it as a sector that would drive economic growth, would drive net-zero ambitions, help with regional disparities, ensure social cohesion,” Ms Nair says.

“So there’s a mindset shift, because you’re looking at it as central and strategic, too. And we’ve seen the start of that with this government, where they’ve elevated it into a more mission-led view.”

Ms Nair also sees a link to impact investors, who are already attracted to the sector’s social purpose.

“It’s a question of: how do you now bring more private capital investors into it? What are the other things you need to do? It’s about how you frame this sector to try and access that. The second part of that is: what way can they access; what’s the solution, what is the product?”

Again, the chief executive points to progress in energy transition.

“Look at the groundswell and capital that’s been amassed… It’s been phenomenal. It’s because it’s been elevated to be much more strategic, much more crucial to a lot of other aspects to our future state. As a consequence, if you talk to a lot of institutional investors, they’ve bought into that.

“How they participate can vary tremendously – and those are the solutions I talk about. But by elevating, you’re casting the net wider on the private-sector side.”

Potential solutions could include project-based financing or alternative ownership structures, Ms Nair suggests, “whether it’s equity or even quasi-equity”, and more use of public sector tools like guarantees and “other types of contingent liabilities”.

“None of this is without challenges,” she emphasises. “It’s a mindset shift, too, and it’s also a mindset shift around risk, people’s perception of risk. So it’s taking those steps to understand and educate that there are other solutions out there beyond what has been used thus far.”

Risk focus

This evolution in outlook is reflected in a strengthened team for THFC, not least with the acquisition of Hargreaves Risk and Strategy, a specialist consultancy focused on the housing sector, in particular small and medium-sized groups.

A new chief risk and operations officer, Martin Fent, will bring expertise from previous roles at funders including Cynergy Bank and RBS International when he joins THFC in January.

The addition of Ben Rick as chief finance officer also speaks to THFC’s intention to strengthen its offering to smaller organisations, which Ms Nair sees as its core product going forward. Most recently, Mr Rick was a senior advisor at Lloyds Bank and previously co-founded fund manager Social and Sustainable Capital. At both, he focused on increasing lending to smaller providers of social and supported housing.

Ms Nair refers to the company’s original premise as an aggregator – bringing efficiency, confidence and a route to market to the small and medium-sized provider.

“We want to continue to do that and understand what that sector needs.”

However, the aggregator will not cut ties with larger associations. “Because of our status as a mutual, where we reinvest all our surpluses, as well as us being adjacent to government, we have a unique position to partner with everyone, because we’re not competing in the same manner. We have much more of a long-term view.”

Ms Nair stresses the continued importance of THFC’s “regionally diverse” borrower base, with more than 150 spread across England, Northern Ireland, Scotland and Wales.

For-profits

Where for-profits are concerned, Ms Nair says the funder is “open to partnering with people who have similar values, purpose and have alignment”.

“I think that’s critical for the sector as a whole, especially as we talk about alternative financing structures,” she adds.

The new direction marks a significant departure, after nearly four decades, from the group’s commitment to the not-for-profit sector, so Social Housing asks whether there is a risk to how investors perceive the aggregator.

THFC will be “very careful there’s no cross-contamination”, whether that’s through governance or messaging around how it operates, Ms Nair says, while emphasising the continued importance of its core business (HAs).

Asked whether THFC would further extend its offering to include house builders, Ms Nair says “likely not, because that, I think, is well served. They can be a partner in a solution, for sure, but probably not our core product.”

Active engagement

With its new strategy launched, THFC is engaging with borrowers and stakeholders both around market access through its core product and exploring new financial solutions. It will be supported by a newly bolstered credit rating, after S&P upgraded THFC Group to A+ (stable) in September.

“It was nice to hear affirmation for our model and for what we’re trying to do,” Ms Nair says. Blend maintains its A2 (stable) rating from Moody’s.  

Within the broader landscape, Ms Nair is also hopeful. Speaking to Social Housing a week after the Budget, she says: “I’m generally an optimistic individual, largely because I’ve worked through cycles.

“I think there definitely was a renewed sense of optimism with the change of government; communication channels seem to be more open for the sector. There’s definitely a focus on the long term, particularly on housing.”

While noting more clarity will need to come out of the spring statement, Ms Nair sees a key role for THFC at a time when public finances remain constrained, in both working with government and leveraging private capital.

“That’s very much what I call our nexus,” she says. “So it’s validating our view and our legacy, which is: how do you bring the two sectors to achieve the same goal?”