For-profit housing associations can be a force for good
Octopus Real Estate is working in partnership with housing associations and local authorities to accelerate the delivery of high-quality affordable homes
STRATEGY
Image: Istock
Peter Merchant
Investment Director, Octopus Real Estate
Over the past five years, fire safety, improving thermal performance and a greater focus on customer satisfaction have increased the need for registered providers to invest in their homes to a level not previously seen. For many, this means making difficult decisions about whether to continue to build more new homes. But with housing demand in the UK as acute as ever, and disparities in discretionary income magnified by the cost-of-living crisis, the need for affordable homes across the country remains high.
Reimagining investment
Octopus Real Estate, part of Octopus Group, is a leading specialist real estate investor, with more than £3.5 billion in real estate assets and secured lending, and a highly experienced team of more than 90 professionals.
At Octopus, our mission is to invest in the people, ideas and industries that will change the world. We believe the advent of ‘for-profit’ registered providers in 2008 created an opportunity to reimagine the ways in which new affordable homes can be funded and developed.
We recently entered the market and our approach is focused on working in partnership with existing housing associations. We want to embrace the strong expertise and knowledge that already exists in the sector and enable our partners to build more homes, address the challenge of moving to net zero-carbon by 2050, and deliver improved services to customers.
We have considered the impact and regulatory landscape for registered providers and have chosen to establish a strategy that includes a for-profit registered provider of our own. This enables us to take direct tenancies and, crucially, to use management agreements rather than leases when entering a partnership with a housing association.
We aim to accelerate the delivery of high-quality, genuinely affordable homes and our investment could scale quickly over the next five years to match the £1 billion currently in our care home fund.
£3.5 billion
in real estate assets and secured lending
£5.7 billion
lent throughout UK since 2015
£1 billion
potential size of affordable housing fund over the next five years
Supporting residents
Values and behaviours are important to Octopus. We are proud that in 2021 we achieved B Corp accreditation, meaning we meet high standards of social and environmental performance, transparency and accountability.
This is reflective of our approach to affordable housing, which is focused on delivering positive outcomes for customers, society, the environment, our staff and shareholders. It is therefore critical for us to work alongside partners who share these values.
We don’t just want to provide capital for our partners – we want to do more to support their residents and businesses. We already have a track record of doing this across a range of sectors.
For instance, in residential care we have our own clinical assurance team and best practice sharing groups to help our partners achieve better outcomes for residents.
We also recently launched the Greener Homes Alliance with Homes England, where we are working together to help small and medium-size house builders achieve improved energy performance in the homes they build.
In affordable housing, we want to work with partners to cut energy bills to zero through working with our colleagues at Octopus Energy.
We are also keen to use the expertise we have access to within Octopus Group to find ways we can help further lower residents’ cost of living. For example, through Octopus MoneyCoach, which exists to make financial education as affordable and accessible as possible.
“Our approach to affordable housing is focused on delivering positive outcomes for customers, society, the environment, our staff and shareholders.”
Over the years, the affordable housing sector has had many types of investors. These have included the 5% philanthropists of the 19th Century, the banks and building societies of the 1990s, and bond investors of the 2000s.
All those that have invested successfully in the sector have recognised that investment needs to be patient and long-term. Like these investors, Octopus is in it for the long term; we are developing partnerships on fair terms with likeminded partners with whom we can establish a new way of delivering affordable homes.
