Any mention of the private sector is met with rejection, or even disgust, in some quarters of the social housing sector, but we both need each other, writes Andy Hulme

This month’s local elections saw shifts in representation across swathes of London. For many people, having a good, safe and affordable home – now or in the future – will have been a key factor in how they voted.

With new councillors getting to grips with being a representative of the people, housing will be a key policy area for those wanting to make a difference for the communities they now serve. 

As they settle in, I want to make a plea that, regardless of the political ups and downs an election brings, we need to be drawing on solutions from across the spectrum.

London is one of the richest, most prosperous cities on the planet. But its housing map is one of stark contrast. Large pockets of extreme deprivation and hardship exist in the shadow of extraordinary wealth. In response, lots of people talk about increasing social housing, which is music to my ears, as I lead one of the country’s largest and most diverse providers and builders of social homes. 

But in the same welcome breath of support for more social housing, a fear strikes me that we’re at risk of cutting off a key route we’ll need to make this happen. Sadly, any mention of the private sector is met with rejection, or even disgust, in some quarters.

Depoliticising the housing debate would help us all

The truth is, we need both public and private money if we’re going to make any sort of dent in London’s housing crisis. There isn’t a simple solution and there isn’t a panacea, it will require all of us to work together to turn the tide and solve the problem.

As someone who runs a charitable organisation managing over 130,000 homes, but who also spent the best part of two decades heading up commercial property and mortgage lending at Lloyds, my experience tells me neither public nor private can sort things on their own.

The housing crisis is complex and multi-generational, and you could fill a newspaper every day with opinions on how to fix it. But there are some relatively simple principles which, if adopted, could have a profound impact within a very short time frame.

The first and most obvious is depoliticising housing. Like healthcare, social care and the environment, it’s a social and economic challenge that invariably exceeds the lifespan of any government. Decisions taken now are more likely to benefit the next incumbents than the current ones. And development, let’s be honest, is often unpopular with those immediately surrounding it. Breaking down party lines and agreeing the principles is essential. We need to avoid electioneering, false promises and damaging policy that shakes confidence and undermines investment.

Demonising the private sector is a zero-sum game

Second, we need to recognise that dismissing or demonising those who need to make a profit on their investment to play their part is never going to get us anywhere. One leading FTSE 100 company delivers around 1 in 10 of London’s new private and affordable homes, and committed roughly £580m in subsidies for affordable housing and infrastructure last year alone. Londoners in desperate need of a good home need organisations like this in the mix.

Third, we need to be honest about the costs and benefits of social housing. It’s fair to say that the real housing crisis is in affordable housing, the cost of which until the last decade was largely borne by the state. The conventional wisdom that social housing pays for itself has been eroded by recent analysis laying bare the public subsidy required to make it work. The viability gap is simply down to the cost of building being much greater than it once was, both in materials and in spiralling regulation.

The case for investing in social housing is clear when you consider that councils in London are spending over £5m every day on temporary accommodation, and that the government is on track to pay £73bn in housing benefit to private landlords between 2024/25 and 2028/29, more than six times what it is investing in affordable homes. Add the £1.1bn the NHS spends each year treating illness caused by non-decent homes, and the picture is unambiguous. Up-front investment in new social housing is not a cost. It’s a saving the Treasury keeps refusing to bank.

Public and private sector must work together

Of course, our sector competes with many other areas for government funding. And I must stress that the recent funding settlement received by our sector was a remarkable milestone, giving us certainty for the next 10 years after a long run of poor decisions undermining the sector’s ability to plan. But with our growing responsibilities as landlords (environmental upgrades, energy efficiency, fire safety, all things every responsible landlord should be doing regardless), the ability to deliver additional housing on top is getting tougher.

This is where there is a growing opportunity in partnering with pension fund investors, which is what we have been doing with Legal & General. Ministers are encouraging it, and the case is compelling: UK pensions currently allocate around three per cent of portfolios to real estate, against roughly eight per cent in the US, with the Mansion House Accord committing the largest UK providers to a 10 per cent private-markets floor by 2030. Even a modest reallocation toward UK housing would dwarf the affordable homes programme several times over. There is real, patient capital looking for a home, and we have homes that need real, patient capital.

But we need to stop thinking about housing in its different silos. Social housing, private rent, build-to-rent, student housing and later living should all sit side by side. Not one of my customers thinks of their home as a tenure category.

The work our colleagues do every day, helping improve health outcomes, providing personal finance advice, supplying school uniforms, filling the gaps that cuts to social services have left, makes a meaningful difference to people’s lives. Giving people a home is about far more than simply building.

If our society, our policy-makers and our investors want to make a real difference, we need a radical change in how we think about all of this.

Depoliticise the debate and recognise that, to close the affordable homes gap, we need to welcome private capital that wants to be a part of the solution.

Andy Hulme is Group CEO of The Hyde Group, which owns or manages over 130,000 homes across the UK