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Savills: for-profit providers to grow portfolio by 120,000 homes in next five years
A new survey from Savills indicates that for-profit providers’ stock will increase sevenfold by 2027.
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The survey took results from all 64 of the currently registered for-profit registered providers (FPRPs). It predicts an increase of stock from this type of provider from 20,000 homes to 140,000 in the next five years, potentially taking FPRP total investment by that stage to £27bn.
The survey also said that FPRPs will gain an additional 9,000 affordable homes by 2023.
The analysis said that investors have grown the number of affordable homes they own by 43 per cent, from 13,671, since the latest Regulator of Social Housing data for 2020-21.
According to Savills, a third of the FPRPs registered since 2019 were from investors with an existing FPRP. Having more than one FPRP is seen to allow investors to hold tenure or fund-specific portfolios, which carry different risk/return profiles and thus appeal to different types of funders.
Savills also predicts that, while large providers with more than 500 homes own 91 per cent of existing affordable stock, the same providers will own 76 per cent of stock in 2027 as newer registered providers catch up.
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It also found that three FPRPs with no complete stock as of 2022 have plans to exceed 1,000 homes in the next five years.
The number of FPRPs has more than doubled, from 31 in 2017, and is expected to rise to around 90 by 2027.
Helen Collins, head of Savills Affordable Housing Consultancy, said: “Although we now have more than 60 FPRPs registered and active, with a further 60 in the pipeline, we are still in the early growth phase of new entrants to the affordable housing sector.
“FPRPs compare the policy and economic landscape of affordable housing with other investment classes in a way which housing associations and local authorities don’t.
“This fresh perspective creates opportunities to question how things are done and brings innovation – a start-up approach.
“As a result, we have seen more interest from housing associations and local authorities coming to us for help in exploring the options for partnership working.
“There is also steep learning curve for new entrants around things housing associations have done for years, such as their deep understanding of regulation and risk.”
Savills said joint ventures between housing associations and FPRPs are an “obvious opportunity”.
It said a growing number of housing associations had already asked to help explore the risks and opportunities presented by partnering with FPRPs and investors.
“Some HAs are weighing up whether to register FPRPs of their own to unlock investment to fund development; others are considering working with existing FPRPs,” said Savills.
It added: “Evidence from our interviews with FPRPs suggests they are also seeing demand from equity in pension funds, insurers, and endowment funds from North America and Europe.”
Steve Partridge, director at Savills Housing Consultancy, said: “Demand is growing for investments that can deliver on environmental, social and governance targets as well as financial returns.
“With inflation running high, affordable housing can give investors inflation-linked returns, while delivering energy-efficient, affordable and well-regulated homes.
“Growth in this sector is limited by the availability of stock, not by investor demand of the availability of capital.”
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