The Hyde Group has formed a strategic partnership with one of the biggest investors in the UK affordable housing and real estate sectors, as part of a strategy to bring new sources of responsible capital into the sector.
Hyde, a housing association that owns and manages around 50,000 homes at affordable levels across the south of England and the Midlands, has formed a partnership with M&G Investments to fund a £500m pipeline of around 2,000 sustainable, shared ownership homes and help aspirational home owners take their first steps in the housing market.
The first stage in the partnership sees M&G Investments make a £61m purchase of 422 shared ownership homes in London and Kent from Hyde through a new shared ownership fund.
Funds received from the shared ownership properties will be reinvested in new homes, with the partnership model offering a long-term objective to deliver a net additionality of shared ownership properties in and around London.
The 422 homes in the deal will be owned by the M&G Shared Ownership Fund, which was registered in 2020 as a for-profit registered provider (RP) and which is therefore required to meet the same high standards expected of other RPs under the regulatory framework overseen by the Regulator of Social Housing.
This means the homes will remain in the regulated social housing sector.
Hyde will continue to manage and maintain all the properties for the long-term, and customers will not see any changes to their shared ownership leasehold agreements, rental arrangements, or their frontline services.
Addressing funding issues
The new partnership approach between Hyde and M&G is a direct response to the funding challenges faced by housing associations as they ensure existing residents’ homes are safe and sustainable, meeting the Fire Safety and Building Safety Bills and government’s net-zero carbon agenda, while also remaining committed to delivering new homes to help solve the housing crisis.
As set out in its 30-year strategic plan, Hyde is committed to working with new partners, such as local authorities, other housing associations and pension funds with shared values, to make best use of public and private capital and deliver its core purpose, which includes delivering the right new build homes in the right places.
Peter Denton, CEO at Hyde, said: “Hyde, like all housing associations, faces multiple funding challenges to ensure our homes are safe, decent and sustainable.
“But we also believe developing new homes is an integral part of our core purpose. If we don’t find new sources of funding, we simply won’t have the resources to keep developing at the same rate.
“This is one of the main reasons we want to work in partnership with others and look at new ways of doing things – including whether we own some homes or manage them on behalf of others.
“It’s imperative we find new sources of funding and the partners that share our commitment in areas like environmental, social and governance (ESG) outcomes, to ensure we can continue to build the new homes that are so desperately needed.
“The shortage of affordable homes is still real, significant and urgent, and we owe it to our future customers to continue to build new homes, despite competing demands on our money.
“This isn’t just about Hyde – there’s a real risk that housing associations will be forced to reduce the number of new affordable homes they build, as a result of having to pay for these essential works.
“While we’ll improve residents’ lives as a result, we mustn’t allow development to stop when there is such a shortage of affordable homes.
“In M&G, we’ve chosen a partner who shares our values and social purpose. M&G is focused on environmental sustainability and social value, and we believe that, together, we’ll drive innovation in product and customer service, helping us to keep improving our shared ownership offer.”
The M&G Shared Ownership Fund attracted more than £215m of initial investment from two local government pension schemes, along with Homes England – the UK government’s Housing Delivery Agency – and two of M&G’s client funds alongside Hyde.
The new fund will invest in Hyde’s existing stock and forward purchase/forward fund developments, combining its extensive knowledge of the affordable space with its wealth of experience in building private rental homes.
The fund will be managed by M&G Real Estate Fund Managers Alex Greaves and Chris Jeffs.
Alex Greaves, fund manager at M&G Real Estate, said: “We’re fully committed to innovating and improving standards and will add scale and efficiency to the portfolio – just as we have in the private rented sector.
“We relish the opportunity to work with Hyde – and to hopefully grow partnerships with other organisations in time – which will help to make a more speedy, positive impact on the delivery of much-needed housing stock.”
The investment from Homes England also demonstrates how the public and private sectors can work together to bring much needed investment into the shared ownership sector and increase housing delivery.
Gordon More, interim chief executive at Homes England, said: “Securing new institutional capital to increase the delivery of new affordable homes is a priority for Homes England.
“Today’s investment is a signal to both domestic and international institutional capital that the government supports sustainable long-term investment in affordable housing to meet the needs of communities across the country.
“M&G has been innovative and successful investing in both market rent and affordable housing. We welcome the opportunity to work with M&G again and to support our Strategic Partner, Hyde.
“We look forward to seeing the fund grow and provide access to high quality new homes.”
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