The fund, which is aiming to raise £1bn in investment by 2026, is seeking to help remedy a chronic shortage of social and affordable housing in the UK.
Octopus Capital said it had raised a further £118m (€136m) for its Affordable Housing Fund from three UK local government pension schemes (LGPS), taking the fund’s total funds under management, including co-investment capital to over £360m.
The new investment has come from Strathclyde Pension Fund, a Glasgow-based LGPS, with £50m, London CIV with £58m, and Avon LGPS with £10m. Strathclyde is a new investor, while the London CIV and Avon investments are building on previous contributions to a fund that has attracted a number of pension institutions, as well as social investor Big Society Capital.
Octopus Capital, the new brand name for the institutional asset management arm of Octopus Investments, said the fund remained open to new commitments as it seeks to meet an investment target of £1bn by 2026. The fund aims to accelerate the delivery of good-quality, affordable homes in the UK, built to “robust” sustainability standards.
As part of that effort, Octopus runs NewArch Homes, a for-profit provider of housing in the social rented, affordable rented and shared ownership sectors, among others. Octopus said NewArch now owned 500 affordable homes, which, it said, demonstrated the fund’s ability to deploy capital at pace. NewArch is now one of the ten largest or-profit registered providers of social housing in the UK, according to Octopus.
In April, NewArch bought 220 homes via a partnership with CHP, a housing association based in Essex, southern England. The homes were a mix of affordable rent and shared ownership, comprising 59 from CHP’s development pipeline, and 161 that were already tenanted. Octopus said CHP and NewArch Homes intended to deliver more homes together to help address shortages in the county.
Christopher Osborne, head of real estate at London CIV, said its new investment in the Affordable Housing Fund brought its total commitment to the fund to £108m. London CIV is an investment pool for 32 of London’s LGPS funds.
“Octopus is on course to deliver the target net returns for our underlying London LGPS Partner Funds and remains focused on increasing the supply of good quality and energy efficient affordable homes across the UK,” he said.
Osborne added that he believed the fund’s team had been bolstered by the recruitment of experienced housing practitioners and investment professionals. Octopus said it had recently appointed Ellie Vlavianou, previously at housing association and developer L&Q, as executive director of its affordable housing fund team.
Jack Burnham, head of affordable housing at Octopus Capital, said the new investments in the fund showed a continued high level of interest in the sector from LGPS investors.
In a study, reported by Impact Investor last September, Octopus found that almost two-thirds of LGPS in the UK regarded affordable housing as the most important area for social impact.
Government support
Burnham also highlighted a recent £39bn commitment to the sector over the next decade by the UK government through its new Social and Affordable Homes Programme, calling it “a hugely positive move”.
“It supports the scale-up of affordable housing delivery across the UK — and aligns closely with the priorities of the long-term institutional investors we work with. This commitment gives us the tools and certainty to go further and faster, in partnership with local authorities, housing associations and developers,” Burnham said.
The government said in early July it had set an ambition to deliver around 300,000 social and affordable homes through the programme, with at least 60% of that in the social rental sector.
Achieving that would require delivering around 180,000 homes for social rent, which the government said was six times more than were delivered in the decade to 2024. The government’s roadmap setting out how it envisaged achieving these targets were set out in a policy paper on “delivering a decade of renewal for social and affordable housing”.
In the paper, the government outlines the scale of the problem being tackled in the UK, noting that over 165,000 children were living in temporary accommodation, over 1.3m people were waiting on social housing registers and home ownership amongst young people had halved in the last 35 years.
