Octopus Investments (Octopus), part of Octopus Group, an investment manager investing in the people, ideas and industries that will change the world, today announces it has raised a further £10m into its Affordable Housing Strategy from Big Society Capital (BSC), the UK’s leading social impact investor.
This follows an initial £50m capital raise from London CIV, the investment pool for 32 of London’s Local Government Pension Schemes.
The strategy has been set up to accelerate the UK’s much-needed delivery of good quality, affordable homes, and will ensure that new homes are built with robust sustainability standards in mind. More energy-efficient homes not only help reduce carbon emissions, but also address fuel poverty at a time when many low-income households across the country are under severe financial strain due to the cost-of-living increases including energy price inflation.
This aligns very closely with BSC’s goal to increase the supply of social and affordable housing in the UK, particularly for the most vulnerable. Its investments to date in this area have helped to finance nearly 7,000 homes which will house over 17,000 of the hardest-pressed people in the UK1.
Our Affordable Housing team have now also made their first deployment through forward funding, committing to acquire 26 homes in Great Haddon, Peterborough, from Vistry Homes. The scheme comprises eight houses and 18 flats and will offer a mix of both affordable rent and shared ownership tenures. The properties will be suitable for both couples and families and will be Energy Performance Certificate B. The scheme will serve an area of high housing need, where the provision of new affordable housing over the past four years has been less than 50% of the required amount.
Vistry are one of the UK’s largest housebuilders, with a strong track record of developing affordable homes. The homes will be owned by NewArch Homes Limited, the strategy’s Registered Provider of Social Housing. All units are expected to be delivered by April 2025.
Jack Burnham, Head of Affordable Housing at Octopus, commented:
“While the affordable housing investment market is still relatively nascent, it is growing, and we continue to receive strong demand from investors. They are attracted by the potential to generate long-dated sustainable income, low correlation to other real estate sectors and the ability to have real tangible impact.
“We are thrilled that BSC have decided to trust us with their capital. It is a sign of their conviction in the funding model and our team’s ability to execute our strategy. We also see it is a stamp of approval in terms of the impact we are trying to achieve.
“And we’re not wasting any time. To be able to deploy the first capital just five weeks after our initial strategy close is something we are really proud of. We look forward to working with both Vistry and Pinnacle on building affordable homes at Great Haddon.”
Drew Ritchie, Investment Director at Big Society Capital, commented:
“We believe that impact-driven private capital has a vital role to play in addressing the country’s housing shortage and we seek to invest in best-in-class managers and investment models that we believe can unlock capital at scale. This is one of the reasons why we have invested into Octopus’ Affordable Housing strategy, as well as its strong focus on supporting low-income families and older households to access a quality, secure and affordable home.
“We were keen to back the strategy’s equity partnerships model that can work hand-in-hand with the Housing Association sector to maintain and increase new affordable supply. Working with Octopus has also been a welcome opportunity to explore and agree routes to strengthen Equality, Diversity and Inclusion (EDI) practice and increase representation across the strategy.”
Fraser Hopes, Managing Director of Vistry Homes, commented:
“Vistry Group has made a commitment to working with partners to deliver high-quality affordable homes across the country. The sale of 26 homes at Great Haddon Wood to Octopus will help people looking to rent a home, or to buy through shared ownership and become part of this thriving new community near Peterborough. We look forward to welcoming the first residents to their homes later this year.”
1 Big Society Capital in-house portfolio analysis, 2023