New figures demonstrate positive impact of rental homes backed by institutional investors
15th February, 2024, London, UK: Figures published today by UK residential fund manager Hearthstone Investments offer an insight into how new rental homes backed by institutional investors such as Local Government Pension Schemes (LGPS) are delivering impact through regional investment and the provision of much needed affordable private rented housing.
Hearthstone, which currently has £450m of assets under management, has published its 2023 Impact and Sustainability Report, based on data collected from its portfolio of 1800 rental homes, a mix of houses and flats in low-rise apartment blocks.
The initial acquisition of new homes delivered regional investment and employment across England, Scotland and Wales spread over 50 different locations. 45% of these sites were transformative regeneration projects of brownfield sites. After the initial investment, the ongoing management of rental homes creates permanent local employment for agents as well as contractors.
The rental homes provide accommodation for residents on average UK incomes. Residents have a broad range of occupations: nurses, police officers, warehouse operatives, software engineers, chefs, to name a few. In 2023, 27% of residents were key workers.
The report also shows that 55% of residents had moved 10 miles or fewer when they moved into a rental home in the portfolio, evidence of how the new homes are meeting specific local needs. An assessment of local infrastructure around the properties covered in the report shows that 83% of homes are located within 500m of public transport and 81% of homes within 250m of public green space.
Cedric Bucher, CEO at Hearthstone Investments comments, “We recognise the importance that investors put on the ESG criteria of the homes we are investing in and it’s a value we share.
“There is a desire to better understand what impact these investments have on the economy and communities where they are focused.
“Our latest report helps us to paint a picture for investors of what is being delivered and for whom, demonstrating value above and beyond capital returns.”
The Hearthstone proposition is to deliver affordable private rental homes to people on average incomes in areas of great need. What’s more, the model is driving wider benefits for the regions through associated employment and infrastructure.
Looking more broadly at the regional impact of institutionally backed housing, the benefits can be seen in regeneration, employment, community and placemaking.
Cedric Bucher continues, “The site selection strategy deliberately focuses on areas not only where the supply/demand imbalance will secure long-term, stable returns for investors, but also where there is good quality social infrastructure – services, green space, access to public transport – all factors which contribute positively to residents’ wellbeing.
“There is also a great opportunity to drive employment both in the short and longer term with local people involved in the construction and ongoing maintenance of the homes.”
Across the portfolios, spend on maintenance, lettings and property management as well as the services that support this - over £5m per annum in Hearthstone’s case - creates employment for contractors, agents, valuers and suppliers, drawing on local skills and knowledge.
Cedric Bucher continues, “Homes backed by institutional investors such as LGPS through our funds are helping to meet a specific housing need – the provision of good quality, energy-efficient rental homes, affordable for residents on average incomes, where they are needed the most. The data in this report shows the potential of this model for the future.
“Institutional investors can deliver positive impact through affordable private rental housing in a way that individual private landlords just can’t and in doing so, see the positive ripple effect into the local economy, environment and communities.”
