for-profit RP
A lot of housing associations’ now looking at for-profit RP model
NEWS May 2021 BY Nest Housing
For development funds A lot of housing associations are considering initiating their own for-profit registered providers,
Chief financial officer of Optivo which own over 45000 homes in southeast and midlands says many social landlords are exploring the potential for creating or joining for profit providers to help strengthening their spending power.
.
Many registered bodies who have been allowed to register by the Housing and regeneration Act 2008 are either developer subsidiaries or backed by an equity firm.
Revealed
Last year London Based Hyde was to be the first housing association to establish its own for-profit conduit.
Yesterday Ms Smith was questioned at the Social Housing Finance Conference yesterday (20 May) if she was expecting more to follow suit.
“Yes,” she Answered. “She was aware that a lot of housing associations are discovering this route. We are under a lot of pressure and financial constraint as we need to invest in fire safety and zero carbon. We must deliver on those measures before we take over any new development, so finding distinct routes to deliver new homes is crucially important. A for-profit is an innovative solution to the challenges we come across.”
The pandemic has only amplified the demands on housing associations, according to Ms Smith added.
“COVID-19 has been a cause of major commotion to the sector. The reality is that our capacity, already already touching the limits, will be stretched further in the future. We have to be robust to explore and find new ways of delivering our purpose – the housing crisis hasn’t faded, rather the pandemic has made it more destructive.”
Optivo is one of several non-profit RPs to enter into management agreements with L&G Affordable Homes – the institutional funder’s for-profit RP – to manage and maintain its development and homes it owns.
Hyde’s director of stakeholder and investment management, Catherine Raynsford told conference delegates that the 55,000-home association had recognised it would have to prioritise spending to meet sustainability, fire safety and quality requirements over building new units.
“It became obvious that a strategy introducing new equity or alternative sources of funding was critical for continuous development,” she said.
“That approach to engross with equity in estimation will enable us to roughly three-fold our own development programme. We have gone about that in the first instance is via a partnership with M&G. That would effectively see us working with its newly established shared ownership fund, which will attain new shared ownership development from our pipeline, and then M&G will own that in its own established for-profit RP.”
£500m fund operated by M&G will finance Hyde to manage maintain the properties as part of deal reported in March this year.
Ms Raynsford revealed that: “As part of the same strategy we are in the process of setting up our own for-profit registered provider. That’s a key part of the second institutional partnership we will be engaging in to and it gives Hyde the opportunity to bring the institutional capital partner to sit with us alongside in a new registered provider conduit.”
Ms Raynsford said, setting up its own profit-focused entity would give Hyde a better control over the tenure of the homes it has and would create,
Without these partnerships, Hyde would have delivered 1000 to 1500 homes annually through its own balance sheet homes annually,