What commercial new entrants can teach the housing sector
How L&G Affordable Homes is using a start-up mentality to shake up the world of social housing
One of the advantages of being new to a sector is that the new entrant is not burdened by the weight of old operating systems and outdated ways of working. That is what Ben Denton, managing director at L&G Affordable Homes, has found since the for-profit registered provider made waves by entering the world of social housing in 2018.
L&G’s ambitions in the sector are significant, with plans to build 3,000 homes a year and for all the homes it develops to be net zero-carbon by 2030. And although it won’t manage all of those homes itself, that level of building will quickly make L&G one of the biggest social housing landlords in the country. Denton says that being a new entrant has allowed L&G to be more nimble in terms of its operating model.
Nimble model
“Because we were a start-up, we didn’t have lots of the legacy that existing players in the sector had, so it was so much easier to innovate,” he says. “And so we used that position to make sure we could innovate as quickly as possible in the sector, and to evolve our business as quickly as possible.”
In terms of detail, L&G believes its operating model will be significantly more efficient than the housing providers with which it is competing. “Our analysis is that in the sector, 25% of all costs are back-office costs,” explains Denton. “You could argue [that is] a bit of waste. So if we can design out that waste, it will either add capacity to the sector, or it’ll allow people to be deployed from back-office into the frontline, supporting their customers.”
Denton says this is particularly important when it comes to the organisation’s decarbonisation targets. “How can we accelerate what we’re doing to get to net zero-carbon as quickly as possible?” he asks. “Because we’re starting off from scratch and we have no legacy, it’s much easier and quicker to design high-performing environmental housing solutions and ways to live in those homes than if we were a big business with 50,000 [existing] customers.”
In numbers: L&G Affordable Homes
3,000
number of homes L&G plans to build per year
165
number of employees to run the business
£1 billion
in capital to be managed
Ben Denton Managing Director, L&G Affordable Homes
“Our analysis is that in the sector, 25% of all costs are back-office costs. You could argue [that is] a bit of waste. So if we can design out that waste, it will either add capacity to the sector, or it’ll allow people to be deployed from back-office into the frontline, supporting their customers.”
Data pool
By building a data pool in a single place – rather than spread out over various housing management, asset management and financing systems – L&G plans to have a more centralised data resource – something which Denton says is crucial in driving efficiency. By having a better, more complete and more central dataset, L&G expects to be able to run its business with just 165 people – a remarkably small headcount for a landlord that expects in time to own up to 6% of all affordable homes in England and manage £1 billion in capital.
While Denton believes that L&G’s example could help maximise efficiencies across the social housing sector, it is as a partner to existing players where the new entrant expects to make the greatest impact. The business will use its larger balance sheet and development capacity to work with local landlords to try to fill some of the gap between supply and demand for new housing.
Support partners
“We’re asking what would your plan be if you had no financial limits, or you had no organisational limits? What would you do and where would you go and how would you do things differently? Let’s say it’s a smaller housing provider that might build 350 homes a year. Actually, they might have enough people and enough aspiration to build 500 homes a year. And there might be a need in this local marketplace for 1,000 homes a year. So if we can increase what we’re supporting being delivered, we can help narrow the gap between what’s needed and what’s currently supplied.”
The future model then, for L&G, might be for the for-profit commercial developer to partner with a smaller local association that knows the needs of its particular community.
“It’s not appropriate to go out there and empower [them] with what we think the solution is,” says Denton. “Because the solution for a local area is really understood very well by a local player. There’s lots of amazing organisations out there and great ideas. We are just a platform to help take those ideas and aspirations and deploy them in practice, understand how they work and then see how we can then scale them up. We’re constantly saying how can we crowd in good ideas and scale them up?”
