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Viewpoint: Can pension funds tackle the UK’s housing shortage?

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Published: 3 May 2024

Pension funds can play a vital role in developing affordable housing for local communities, but there are several key considerations they should focus on, says Better Society Capital’s Linda Carmody.

housing homelessness affordable homes
Linda Carmody, senior relationships manager, Better Society Capital, believes that pension funds can play a vital role in tackling the UK housing crisis | Sawitree Lyaon on iStock

In March, the UK Labour politician Dame Siobhain McDonagh sent a compelling letter to ten pension funds urging them to invest in safe and affordable temporary accommodation in her constituency.

The letter underscored a critical issue: local councils are overwhelmed by the housing crisis, evidenced by the staggering £1.7bn (€1.17bn) spent on temporary accommodation last year, according to Shelter.

The essence of Dame Siobhain’s appeal — that pension funds can significantly contribute to addressing social issues in the UK — resonates deeply with our mission at Better Society Capital. Since our inception over a decade ago, our aim has been to grow the UK’s social impact investing market.

Our journey has seen us channel investments into social and affordable housing, a market that we recognise as an increasingly attractive investment for pension funds. Some of these funds focus on purchasing properties, upgrading them to high standards, and then leasing them to homelessness charities and housing associations. This provides tenants with stable, affordable and secure accommodation with access to essential support services aimed at improving their health, wellbeing, and employment opportunities. Other funds buy or build new housing stock in the least affordable areas and lease them at affordable rates.

Throughout the years, we’ve co-invested alongside several pension funds, such as Greater Manchester, Strathclyde, and London CIV, focusing our investments on good quality social and affordable housing.

Investing in social and affordable housing offers pension schemes a chance to diversify their portfolios and secure stable, long-term returns.

In my capacity at Better Society Capital, I regularly speak with pension fund managers to explore both the challenges and the prospects within this sector.  An understanding I have gained during this time is the uniqueness of each pension fund and the distinct hurdles and opportunities encountered when investing in such impactful projects. However, despite these differences, the attractive investment characteristics of social and affordable housing present a compelling case for broader pension fund involvement.


Investing in social and affordable housing offers pension schemes a chance to diversify their portfolios and secure stable, long-term returns. What’s more, demonstrating the social impact of these investments is becoming increasingly important to members, and investments in this kind of housing deliver substantial social benefits and tangible evidence of their positive impact.

Linda Carmody, senior relationships manager, Better Society Capital | Better Society Capital

At Better Society Capital, we recently conducted research with Alma Economics highlighting the significant impact these investments have supporting people at risk of homelessness. Analysis of five social property funds managed by Resonance reveals that over the last decade, these investments have supported 3,300 individuals, including 1,607 children, with safe and stable alternatives to the poor-quality temporary accommodation that is usually on offer.

This, alongside support services provided by their housing partners, saved local and central government £140m in spending on temporary accommodation plus other homelessness costs on healthcare, mental health and criminal justice services between 2013-2023.

Investing in best-in-class funds

Over a decade of experience has taught us that challenges can arise for funds when the impact on tenants is not at the heart of operations.

There are three key factors to ensuring this happens. Funds should partner with high-quality housing associations and charities that are genuinely experienced in challenges faced by tenants. Notting Hill Genesis housing association is a brilliant example. It has provided care, support and shelter for people at risk of homelessness since the 1960s and operates more than 600,000 homes. In 2023 it partnered with Resonance to manage 600 properties aimed at supporting families in high need.

Secondly, a fund management team should ideally demonstrate experience in investing into social and affordable housing. For example, Better Society Capital’s decision to invest into the Man GPM RI Community Housing Fund in 2021 was strongly influenced by the fund management teams experience working with housing associations. The fund aims to provide affordable, new build homes in desirable areas for key workers such as nurses, teachers and bus drivers – and is set to deliver 1,295 homes by 2026. This year we are also excited to support the development of new affordable housing funds by two mainstream players – Octopus and Savills. Again, both teams were able to demonstrate experience of social and affordable housing, in the delivery team or on the board.

Finally, funds with a rigorous approach to assessing impact risks and opportunities are less likely to face impact challenges. Better Society Capital works with the funds we invest into to develop what we call the ‘Impact Canvas’ which helps managers define their impact objectives, metrics and management plan for the fund.

Our investments have underscored the dual benefits of financial returns and social impact, reinforcing the attractiveness of social and affordable housing as an investment for Local Government Pension Scheme (LGPS) funds. This sector, now valued at over £5bn, is growing thanks to their continued strategic investments.

As we work to align more capital with social needs, we look forward to engaging with more pension fund managers who are willing to embrace the opportunity for a future where everyone has access to safe and secure homes.

Linda Carmody is senior relationships manager at Better Society Capital.

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