Investment secured from Big Society Capital for octopus in UK budget-friendly dwelling projects
The Octopus Affordable Housing Fund, an impact-driven investment strategy, is making significant strides in addressing the UK's housing shortage. The fund, managed by Octopus Capital and NewArch Homes, has raised over £360 million from institutional investors, including multiple Local Government Pension Schemes (LGPS) such as London CIV, Strathclyde, and Avon LGPS [1][2][4].
The fund's initial close was £50 million from London CIV, enabling the construction and retrofitting of more than 500 affordable family and older persons homes across various UK regions [1]. Following further raises, including a £118 million tranche mainly from LGPS investors, the fund now owns 500 affordable homes and actively expands its pipeline to scale its social impact [2][3][4].
Octopus Capital’s registered provider NewArch Homes manages these assets and has adopted the Sustainability Reporting Standard for Social Housing to ensure transparency and consistent ESG impact reporting [1]. The fund aligns investment with local authorities, housing associations, and developers to meet growing housing needs while maintaining quality and sustainability [2][4].
The strategy excludes specialist supported housing but invests across a spectrum of affordable housing types, such as elderly affordable housing, extra care, social rent, affordable rent, shared ownership, intermediate rent, and rent-to-buy [4]. The fund's focus on affordable housing provision is increasing among social impact investors in the UK due to the failure of supply to meet demand and rising costs in house purchases and rentals.
The Affordable Housing Fund has made its first deployment through forward funding, committing to acquire 26 homes near Peterborough from Vistry Homes. These homes, expected to be ready by April 2025, are being built in an area of high housing need, where provision of new affordable housing has been less than 50% of what was required over the last four years [5].
The growth in the affordable housing investment market is evident, with strong demand from investors attracted by the potential for long-dated sustainable income, low correlation to other real estate sectors, and tangible impact [6]. The fund's investment in renewable energy and affordable housing aligns with the Avon local authority area's pension fund's plans to increase investments in these sectors [3].
It's worth noting that the Resonance housing initiative, another significant affordable housing project, has welcomed tenants, signifying its completion [7]. Octopus Investments is part of Octopus Group, which also includes sustainable energy provider Octopus Energy [8].
Real estate investors are paying more attention to social and environmental considerations, partly due to stakeholder pressure and tighter ESG-related requirements in Europe and elsewhere [3]. This shift in focus is evident in the investment strategies of firms like the Octopus Affordable Housing Fund.
References:
[1] Octopus Group. (2023). Octopus Affordable Housing Fund raises £360m to deliver 5,000 affordable homes. Retrieved from https://www.octopusgroup.com/press-releases/octopus-affordable-housing-fund-raises-360m-to-deliver-5000-affordable-homes/
[2] Local Government Pension Scheme (LGPS) Central Limited. (2023). London CIV invests £118m in Octopus Affordable Housing Fund. Retrieved from https://www.lgpscentral.org/news/london-civ-invests-118m-in-octopus-affordable-housing-fund/
[3] Financial Times. (2023). Pension funds take on affordable housing and renewable energy. Retrieved from https://www.ft.com/content/1e42e40a-d4f2-4d62-8204-5174629908e8
[4] Octopus Real Estate. (2023). Octopus Affordable Housing Fund. Retrieved from https://www.octopusrealestate.com/what-we-do/affordable-housing/
[5] Octopus Group. (2023). Octopus Affordable Housing Fund makes first deployment. Retrieved from https://www.octopusgroup.com/press-releases/octopus-affordable-housing-fund-makes-first-deployment/
[6] Property Week. (2023). Affordable housing market growing as investors seek sustainable income. Retrieved from https://www.propertyweek.com/news/affordable-housing-market-growing-as-investors-seek-sustainable-income/
[7] Resonance. (2023). Resonance housing initiative completes. Retrieved from https://www.resonance.uk.com/news/resonance-housing-initiative-completes/
[8] Octopus Group. (2023). About us. Retrieved from https://www.octopusgroup.com/about-us/
- The Octopus Affordable Housing Fund, an impact-driven investment strategy, seeks to deliver 5,000 affordable homes in the UK, having raised over £360 million from institutional investors, including multiple Local Government Pension Schemes (LGPS).
- The fund aims to expand its pipeline, owning 500 affordable homes and actively scaling its social impact, through investments in various types of affordable housing, such as elderly and extra care housing, social rent, and shared ownership.
- Investors are drawn to the Affordable Housing Fund due to its potential for long-dated sustainable income, low correlation to other real estate sectors, and tangible impact on addressing the UK's housing shortage.
- Real estate investors, under increasing pressure to consider social and environmental factors, are aligning their investment strategies with projects like the Octopus Affordable Housing Fund, which also invests in renewable energy, following tighter ESG-related requirements in Europe and beyond.
