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Blackstone has sold 3,000 homes to the UK’s largest private pension fund for £405mn in the biggest affordable housing deal of its kind, as the country’s new Labour government seeks to boost supply.
The Universities Superannuation Scheme (USS), the £77bn academic pension manager, has bought the portfolio of shared ownership homes from Sage — an affordable housing company majority-owned by Blackstone alongside real estate investor Regis.
The deal is the first sale by Blackstone from its UK residential portfolio, which includes roughly 20,000 homes. It marks the second-largest residential sale in the UK this year, according to MSCI, following Blackstone’s earlier agreement to buy £580mn worth of new homes built by Vistry.
Shared ownership schemes aim to help people get on the housing ladder by allowing buyers who cannot afford the entire property to buy a share of their new home with the option to acquire the rest over time.
USS’s move into the housing sector is likely to be welcomed by ministers and policymakers keen to see greater private sector investment.
The new government, which is financially constrained, has prioritised encouraging private investment in key infrastructure from energy supply to housing to help it deliver promises such as the construction of 300,000 new homes per year.
Chancellor Rachel Reeves met Blackstone boss Stephen Schwarzman on a visit to New York last week to drum up investor interest in the UK.
James Seppala, Blackstone’s head of real estate in Europe said that, through Sage, his firm had been the biggest provider of newly built affordable housing in the UK for the past three years. “This transaction will allow us to continue to invest capital into Sage Homes to help alleviate the structural undersupply of housing across the UK,” he said.
The properties purchased by USS will sit in Sparrow Shared Ownership, a new social housing vehicle launched this week and owned by the pension fund. Sparrow will be chaired by David Avery, the former chair of Clarion Housing.
Sage was started in 2017 and says it has committed £3.7bn to building 17,000 affordable rent and shared ownership homes, with a further 5,600 in the works.
While shared ownership has been seen as a way to provide an affordable route to home ownership, critics point to multiple risks. A House of Commons report this year concluded that it is “very difficult for many shared owners” to reach full home ownership because the process of buying further shares is too onerous and because they have to pay 100 per cent of maintenance costs despite only owning a share of the property.
Residential properties have been popular with investors despite the widespread downturn in commercial real estate values and dealmaking brought on by higher interest rates. Private equity group Ares last month led a £755mn preferred equity investment into Wembley Park landlord Quintain.
Just 2 per cent of the UK private rental sector is owned by institutional investors such as pension funds and insurers, compared with more than 35 per cent in Germany and the US, according to estate agency Savills.