Local government pension schemes – the housing crisis needs you – Green Street News
Marc Gilbard, Executive Chairman, Moorfield Group
In 2023 a person’s perspective on the housing market is most likely dictated by their age, earnings and savings. Housing wealth sits primarily with older generations, whose housing equity is the backbone of their personal finances. They have ridden the house price growth wave and now they want to see their wealth and quality of living preserved. This has a material impact on housing supply.
Catering for the sensitivities of British politics means that neither of the main parties dare risk anything radical regarding housing supply, for fear of alienating home-owning voters that would likely rebel against having development taking place near them or in the surrounding pastures.
However, for the coming generations, the current housing supply and its cost are key issues. How do they start their journey on the housing chain when it is so prohibitively expensive to get on it in the first place? The simple answer is that many can’t and so they rent – and in the UK, professionally managed residential stock of reasonable quality is still in its infancy. Less than 5% is owned by institutional landlords pursuing acceptable “brand standards”.
The central issues for UK housing, whether buying or renting, can be summed up in four words: availability, desirability, affordability and reliability. As such, the question needing to be answered, and then acted upon, is how these four horsemen can be conquered while not simultaneously sacrificing every ministerial champion of the cause? The answer must surely lie in public-private partnership, so solutions are found through acceptable public policy aligned with responsible commercial capital.
The catalyst to solving the housing supply crisis does not come in the form of development wherever it can be squeezed in or spread across the sacred green belt. Instead it lies in the provision of suitable senior housing, to free up the mature end of the housing chain while simultaneously repurposing existing “not fit-for-purpose” housing and redundant commercial property already sitting in or nearby suitable infrastructure hubs and networks. Only then does the undersupply and the need for new development become fully quantifiable.
Most people want to see investment in their local areas, especially where there is a need for gentrification. And so there would be little to no objection to this strategy – thereby making it safe for those in public office and hopefully profitable to private enterprise.
The undersupply and affordability issues around house ownership have recently led to an affordability focus spreading into the rental market. Buy-to-let landlords are being targeted by regulation and additional taxes, actively disincentivised to continue, while institutional landlords remain on the sidelines contemplating the best ways to tackle such a fragmented market, despite the obvious aggregation and scaling opportunity.
We know of the amenity-rich build-to-rent market. But for the majority, renting is a far less desirable experience because of a lack of certainty around the quality of a home, the service and possible eviction. The social cost of this on families is immeasurable, with the shocking number of “non-decent homes” reaching 23% in the private rented sector. This is the highest of all tenures according to the English Housing Survey – highlighting the gravity of the situation.
Better housing for the ageing generation would be a catalyst in solving the housing crisis
Professionally managed build-to-rent blocks do indeed offer quality homes and high levels of service “at a price”. But even these developments are in short supply, take time to deliver and are challenging to fund. The greatest opportunity for the professional landlord is in the existing housing stock and in making it fit for purpose.
For each of England’s 77 local government pension schemes, residential property remains a relatively simple asset class to navigate. If their capital is to be invested with the greatest positive local benefit, this is where it should be focused. Investing in rental housing also offers long-term, liability-matching income streams with counter-cyclical, inflation-hedging qualities.
There is a real and current opportunity for local government pension scheme investment to improve the quality of Britain’s urban fabric, by investing in both the upgrading of existing housing stock and funding the delivery of suitably focused and environmentally appropriate new housing.