Octopus Investments has launched an affordable housing strategy for institutional investors, to accelerate the UK’s much-needed delivery of genuinely affordable homes.
The evergreen strategy is targeting initial commitments of £200m to £300m across multiple closes in 2023.
In May, Octopus announced it had acquired a registered provider (RP) of social housing and will operate a direct let model.
Octopus says this is to ensure a fair sharing of risk with its approved housing association partners, who will manage the properties on its behalf.
The acquisition ensures the strategy is subject to appropriate regulatory oversight and enables the company to draw on grant funding to support the delivery of new homes.
The strategy will use a fully onshore, unlisted real estate investment trust structure.
Octopus says the new homes funded by the strategy will be built to high quality and robust sustainability standards.
It also notes that building stock with as close to zero energy bills is a “key goal”.
The strategy targets index-linked income from the forward funding, acquisition, and long-term ownership of a portfolio of affordable homes across the UK.
Co-investment opportunities will be available for locally interested investors such as Local Government Pension Schemes (LGPS).
The strategy will be led by Octopus Real Estate head of affordable housing Jack Burnham.
Commenting on the announcement, Burnham says: “With Housing Associations searching for alternative funding routes for their development pipelines in the face of net zero costs and increased cost of debt, and Local Authorities aiming to move back into large scale social housing provision, there is a real need for trusted partners and private capital to step up.”
“This is exactly what we are trying to do with our strategy, by helping institutional investors to channel their money into this area.”
Octopus Investments head of institutional Jennifer Ockwell adds: “What is particularly interesting about this strategy for investors, is that it provides Local Authorities and LGPS’ with the opportunity to co-invest. This increases the total capital available for affordable housing but also drives alignment, as we can work with these investors to fund schemes in their local areas.”
“To add to that, this strategy is geography-agnostic within the UK and instead, is needs and affordability based, which supports the UK’s levelling-up ambitions.”
