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News Release

London

Affordable Housing Sector Growing Player in Private Market

Say JLL in latest research


New research from JLL suggests that Registered Providers (RPs) are becoming increasingly influential in the delivery of private homes. A new survey shows that nearly half (48%) of respondents sell properties on the open market and 35% have begun some form of Build to Rent development programme. London’s 15 largest RPs collectively have 13,000 private units in the planning system.
Government cuts to grant funding have meant that Registered Providers need to find new sources of funding to continue to deliver badly needed affordable homes. Selling or renting properties on the open market generates revenue that can be used to cross-subsidise core affordable housing provision. This cross-subsidy is providing a vital top-up to other forms of funding such as debt and bond issuances.

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Adam Challis, Head of Residential Research at JLL comments: “Registered Providers have demonstrated a high degree of flexibility in restructuring under the new funding regime. At the end of 2014, 4,100 open-market homes were under construction by RPs in London.”

There is some concern that this shift towards market-facing activity increases risks for this traditionally conservative sector. The survey revealed that exposure to market cycle is the largest concern for RPs, followed by increased debt and the possibility of incurring financial losses. However, the sector needs to increase its attention towards risk-mitigation strategies, with only 42% having pursued a shared-risk, joint venture strategy and fewer than half having created either a ring-fenced subsidiary or a separate governance structure for market-facing activity.
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Richard Petty, Head of Affordable Housing at JLL notes: “The affordable housing sector must ensure that it continues to innovate on the revenue side, but also creates the governance structures to protect the sector’s enviable credit rating. The reputational risk from any one RP failing would be catastrophic for the sector’s overall rating.”