Of the 69 for-profit RPs, nearly a third are sponsored by property developers. What has attracted these businesses to move into the operational side of the social housing sector, and why might other developers consider doing the same?
There are a number of factors at play. Primarily, developers are looking to secure best value from the properties they are building, both in capital terms in relation to initial sales and also being able to benefit from the relatively stable long-term rental income affordable housing is capable of generating. For a number of years, developers in certain geographic locations have reported difficulties in finding RPs willing to purchase their s106 mandated properties. In a market where 'traditional' not-for-profit RPs are rightly concerned with existing stock investment requirements, some developers have seen the potential for this issue to become more widespread. Where deals are there to be done, there has also been a sense that the pricing does not reflect true value for the developer. Both factors have encouraged developers to consider retaining the affordable housing that they develop.
In addition, a number of developers have been attracted by the ability to access Homes England and Greater London Authority grant funding directly. This diversifies the funding types and sources available to them and enables them to develop more affordable housing and to generally strengthen their relationship with these key stakeholders as well as arguably de-risking larger sites.
Developers have also been interested in establishing their own RPs for non-financial reasons; it can allow for better control over placemaking on large schemes or regeneration sites. It can also allow land acquisitions to be structured in more creative ways when it is known that the site will remain within group ownership. In such situations where the affordable and market properties are owned within the same group, it can also allow for 'joined up' property / housing and site management. Where a group has its own housing / property management platform, a number of developer sponsored RPs have entered into housing management agreements with those platforms. Alternatively, they have typically sought to partner with a 'traditional' not-for-profit RP for the provision of housing management services.
There are of course other benefits for developers. It gives them wider optionality for their pipeline of stock, and additional ways of reacting to the market. For example, in an area where market sales are slower than anticipated it may be possible for such properties to be acquired by the for-profit RP to be converted to shared ownership or intermediate rent tenures.
In an increasingly challenging regulatory and economic climate, developers are rightly exploring all their options in an effort to deliver continued growth.
