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M&G invests £62mn with leading housing associations

Partnerships demonstrate a growing appetite for housing associations to partner with investors and institutional investors.
Southminster Road Burnham-on-Crouch (002)

Against a backdrop of growing demand for shared ownership properties in the UK, M&G has struck a series of deals worth a combined £62.7mn to acquire 370 homes through a trio of partnerships with Chelmer Housing Partnership (CHP), Hyde Group (Hyde), and HSPG-backed Park Properties Housing Association (PPHA). The deals were made on behalf of the M&G Shared Ownership Fund which aims to provide investors with index-linked rental income and house price exposure by acquiring or funding the delivery of modern, sustainably-designed, affordable homes.

The partnerships are a continuation of M&G’s efforts to manage some of the funding challenges faced by housing associations through bringing long term, patient capital, into the sector. Under the terms of the transactions, M&G will directly fund the development of new homes or buy existing and pipeline stock, in turn, enabling the housing associations to recycle capital into new homes and further affordable housing initiatives. CHP, Hyde and PPHA will continue to manage the properties on behalf of M&G, ensuring a seamless transition for residents.

Recent Savills research highlights growing appetite from housing associations to partner with investors and For Profit Registered Providers (FPRP), which now own more than 28,150 affordable homes – a 35% increase since March 2022. A growing presence in this market by FPRPs is only likely to accelerate further as investor demand for affordable housing with long term inflation-linked income shows no sign of abating. FPRPs are currently forecasting the addition of a further 9,300 homes by the end of 2023, taking total stock to almost 37,500.

Alex Greaves, Head of UK and European Living at M&G Real Estate, says: “These latest strategic partnerships mark a crucial step in our journey to meeting the significant demand for the shared ownership model in areas of the country where it is most needed. It’s also a brilliant example of how the private and public sectors can collaborate to make a positive impact on an underserved market. We’re delighted to be working with Hyde again and look forward to a long and productive partnerships with CHP and PPHA.”

With the closure of the Government’s Help-to-Buy scheme earlier this year, shared ownership offers an affordable route to home ownership for first-time buyers and those who are unable to afford owning their home outright. The part-buy-part-rent model provides a secure home managed by a professional landlord through a reduced deposit based on a part equity share, whilst the rent on the ‘unbought’ equity is often significantly lower than the equivalent market rent.  Shared owners then have the benefit of house price growth and the ability to increase equity share – otherwise known as ‘staircasing’ – at a manageable pace.

Paul Edwards, Chief Executive of CHP, adds: “We’re proud of our track record of building new affordable homes across Essex and are excited to be combining our expertise in this new and important partnership. Working with M&G we have brought in more investment for new homes, whilst still providing our great local customer service for the homes M&G have purchased. We are looking forward to continuing this relationship so that we can proactively tackle the housing crisis together in the longer term.”

Guy Slocombe, Chief Investment Officer for the Hyde Group, says: “This deal demonstrates how this model allows us to accelerate the delivery of more affordable homes while enabling us to quickly recycle the capital we generate into new schemes. By combining our expertise in managing homes well with the investment M&G offers, we are bringing new investment into the sector, and it is playing an important role in meeting the challenges of the housing crisis.”

Guy Horne, CEO of HSPG, concludes: “We are delighted to partner with M&G on our first transaction together, which introduces additional long term capital into the sector. By continuing to manage the homes, we will give our tenants consistent and high quality service. As our partnership develops, we are excited to deliver more affordable housing up and down the country as we help people gain access to home ownership.”

M&G Real Estate is part of M&G plc’s £76.7bn Private Markets division.

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