Written evidence submitted by Savills Investment Management / Simply Affordable Homes RP Limited [FFS 057]

Savills Investment Management (“Savills IM”) is a global real estate investment manager with c.EUR 25[1] billion of assets under management for over 250 institutional investors. In September 2022, Savills IM acquired a majority share in Simply Affordable Homes, a UK affordable housing platform including a for-profit Registered Provider, Simply Affordable Homes RP Limited (“Simply Affordable Homes RP”), established with the aim of helping bring much needed long-term capital into affordable housing.

Savills IM and Simply Affordable Homes RP have provided responses below to two of the points where evidence was sought on the enquiry into the finances and sustainability of the social housing sector.[2]

7. Have for-profit Housing Associations made the sector, as a whole, more financially robust?

Many studies, including some listed below, have highlighted the challenges to the supply of new housing in the UK and particularly to new social housing. This has led to multiple problems including historically high house prices relative to incomes and more than 1 million households on local authority housing waiting lists. Current and forecast run rates for new house production are substantially below the government’s target of 300,000 new homes per annum.

Additionally, the current social housing sector is mostly comprised of not-for-profit housing associations who are facing multiple financial pressures including: limited access to equity capital (given their not-for-profit status), a limited availability of government grants, increasing debt servicing costs on new debt, and large expenditure needs for existing stock portfolios due to safety spending and decarbonisation plans and targets. With these pressures, many housing associations are currently having to consider reducing future development plans.

The introduction of for-profit registered providers has brought much needed new capital into the sector, providing welcome additional funding sources, and making the sector more financially robust. For-profits own a small amount, less that 1% of existing stock, albeit their participation is expected to increase. A recent Savills research report5 projected that the number of units owned by for-profit registered providers will increase four-fold by 2028. This growth has the potential to bring a substantial amount of additional capital into the housing sector.

Housing associations are increasingly looking at a variety of partnership models with this new capital to help continue with their development programmes.  Savills IM and Simply Affordable Homes RP believe that measures which help attract long-term patient capital into the sector are well aligned with the sector’s interests, will continue to increase the sector’s financial robustness, and should be encouraged.

Sources:

Tackling the undersupply of housing in England – March 2022[3]

Delivering a Step Change in Affordable Housing Supply - March 2022[4]

Spotlight: Private Capital and Affordable Housing – Spring 2023[5]

25. How appropriate is the existing regime in respect of regulating for-profit housing associations?

There is an extensive regulatory regime in place for for-profit registered providers; new registrations often take 12-24 months to approve. Following registration for-profit registered providers have to comply with the same regulatory standards as not-for-profits. The regime also provides the regulator with a wide range of powers to ensure compliance with the standards and thereby provides many protections for tenants, with new consumer regulation and standards currently being implemented. We are supportive of appropriate regulation in this context of protecting consumers and the sector in general.

We believe that tweaks could be made to the wider regulatory landscape in order to encourage further investment into the sector. These include:

• Parity on Stamp Duty Land Tax treatment of for-profits with not-for-profits
• Review of approach to certain aspects of grant uplift calculations for for-profits where the current system can disincentivise investment
• Regulatory changes encouraging sector investment (for example, Solvency II changes facilitating insurance capital investment in the sector, encouraging local government pension scheme sector investment) 
• Greater transparency on and/or longer term rent settlements
• A quicker / simplified process for a regulated for-profit that has already been through a comprehensive registration process to establish further for-profit entities for the purpose of facilitating additional capital to enter the sector.

May 2023