In this episode, Andrew Teacher sits down with Rachel Miller from Housing Growth Partnership (HGP), a subsidiary of Lloyds funded by both the bank and Homes England, and John Tatham from PfP Capital, Places for People’s fund management arm, to discuss how their joint venture is leading the charge for higher-quality housing.
Launched this April, the £390 million JV between Housing Growth Partnership and PfP Capital is targeting 1,200 build-to-rent and for sale homes across ten of the UK’s regions, including Glasgow, Nottingham and Newcastle. The homes will be delivered by igloo Regeneration, which was acquired by PfP earlier this year.
John Tatham, PfP Capital’s finance director, rallies against the poor standards that have characterised much of the housing sector to date. According to John, the JV’s community-focused, sustainable approach to housing delivery isn’t just a nice-to-have, but a must-have in today’s climate.
As he explains: “Homes which are built more sustainably, homes which are better quality, homes which create great places – they will sell better. They will sell faster.”
According to Tatham, this premium is already evident within the JV’s inaugural 400-home Glasgow scheme, 80 percent of which target an EPC A. “We valued the scheme in terms of its environmental attributes,” he says. “Then when we finished the design, we went back, and its values had gone up four percent.
“That’s because people are prepared to pay because they look at the whole life costs of their building, how much it costs to heat and light. They’re all a factor, not just the cost of buying the house.”
PfP Capital’s direct community engagement – sometimes over a pub lunch – differentiates it from the traditional approach to housing delivery that fails to factor in local needs, which John dismisses as “dropping in a standard Tudor box into a piece of land.”
“That’s got its place on the larger greenfield sites,” he continues, “but when you’re dealing with the most deprived parts of a city, you need to take a more nuanced approach.”
Rachel Miller was formerly head of new investment at Grosvenor and is now investment director at HGP, which invests across the living sectors. She explains that Lloyds and Homes England first came together to support a greater diversity of investment by providing equity alongside developers.
According to Miller, those who partner with HGP “probably have access to debt financing, but there is either an equity gap that they need to fill in order to make that scheme happen, or they have the capital to do it but by using our equity alongside theirs, they can do three schemes rather than one.
“Even developments which would have been forward funded a year ago are coming to us and saying: ‘You know what? Let’s build things speculatively. Let’s partner on them.’ The approach that we take is very much about that risk sharing.”
Though the prospect of private capital partnering with the affordable housing sector was once met with a degree of scepticism, the pair agree that in an age of interest rate rises, high construction costs and stringent EPC regulations, access to institutional capital is increasingly important to amplifying the ambitions of social housing providers.
As Miller explains: “We are obviously seeing a huge amount of private capital coming into the sector. Realistically, the sector is going to have to be more innovative around funding, particularly if we want to keep delivering more homes as well as deal with the challenges from those that are already under management.”