Institutional capital now represents roughly a quarter of the UK’s £6.02bn impact investment affordable housing market as of the end of 2024, according to a report by Better Society Capital and The Good Economy.
Institutional investment is contributing most heavily into regions across the UK where housing is least affordable, according to a study published by Better Society Capital (BSC) and The Good Economy (TGE).
The study analysed 14,739 homes and £1.56bn (€1.77bn) of gross assets across six investment fund managers (IFMs). The research provides a picture of how equity-backed Registered Providers are contributing to affordable housing delivery amid increasing constraints in the traditional social housing sector.
According to the report, institutional capital is now a material – albeit evolving – contributor to affordable housing delivery in the UK, with six investment fund managers stewarding £1.56bn across 14,739 homes, representing roughly a quarter of the UK’s £6.02bn impact investment affordable housing market as of the end of 2024.
While smaller in size relative to the wider sector, equity-backed registered providers already account for about 20% of new affordable homes delivered in 2024 and 2025 according to the study.
Speaking to Impact Investor, Drew Ritchie, investment director at BSC, stressed that transparency is essential for legitimacy, oversight and investor confidence in a fast-growing institutional segment.
Ritchie said that BSC wants to present what the for-profit RPs are doing and give stakeholders the ability to interrogate that and form their own opinions.
“Affordable housing should be a place where institutional money that cares about impact can play an important role,” said Ritchie.
Quality standards
The report also found that homes delivered through these investment models are more likely to meet minimum space standards. Across the properties analysed in the study, 63% meet the Nationally Described Space Standards (which sets the minimum amount of indoor space a home should have to be comfortably big enough for the people living there), compared with around 43% across wider sector benchmarks.
According to BSC, this suggests that institutional investment is helping to deliver larger homes than much of the current affordable housing supply. Energy performance is also stronger, with 82% of homes achieving a high energy rating of EPC B, which exceeds the current sector norms.
Institutional investors are also financing slightly more affordable homes, known as Section 106 homes, than the national average while relying less on grant funding and are increasingly delivering properties without any subsidy.
““Having private finance or investment capital coming in allows some of those [Section] 106 sites to be unlocked, which otherwise might struggle to find a buyer, which feels more acute at this point in time,” Ritchie told Impact Investor.
The study also found that, compared with the national affordable housing supply, investment fund managers deliver proportionally less social and affordable rent, but more affordable home ownership and discounted market rent, however.
Furthermore, delivery is heavily concentrated in the regions with the highest affordability pressures, such as the South East, London and East of England, signalling that institutional capital is flowing into structurally undersupplied markets where need is most acute.
The study also highlights affordability challenges. While 59% of fund managers’ rental units are affordable to households at or above the 30th income percentile, and 75% of affordable home ownership units are affordable to median-earning households, homes delivered in the highest-pressure regions show reduced affordability due to rent formulas tied to market rates.
Overall, the analysis positions institutional investment as a structurally important contributor to affordable housing delivery by bringing in new capital, improving design and energy standards, and continuing to support supply.
