Housing report eyes LGPS funds

Local government pension investment chiefs have given a lukewarm reaction to a recommendation in a new government-commissioned report that they should allocate a proportion of their funds to invest in local housing.

The government this week published the Elphicke House Report, established by chancellor George Osborne in his 2013 Autumn Statement to explore how councils could help boost homes construction.
The report said setting aside 3% of LGPS investments could lever in up to £5bn towards housing and local infrastructure.
It said: “pension funds could be challenged by elected members to invest a modest proportion of their potential investment in residential property which would lead to a substantial increase in more new homes nationally.”

Paul Tysoe, investment and fund accounting manager at LGSS, the shared services company owned by Cambridgeshire and Northamptonshire county councils, said: “It is clear what our role is – we are there to meet the liabilities of the fund.
“If we can find things that could support this type of investment then we would consider them but they have to meet our investment criteria. And I would need to see the detail of any proposals to be able to judge that.”

Elsewhere in the report, the authors called for a new, independent, Housing and Finance Institute aimed at helping to “shape a stronger housing finance market”.
The institute could help improve understanding of finance and asset management among local authorities, according to the report.
In addition, it could help councils to build packages of proposed developments and housing portfolios.
“In that way, there would be opportunity for pension funds to build up a scaleable portfolio across a broader geographical operating area,” it said.

The government’s response seemed to pour cold water on the establishment of such a new body, however.
In a statement, it said: “The government accepts in principle the importance of greater support to unlock financing opportunities.
“The government will explore with the local government sector how the intention behind this recommendation might be delivered in a way that secures value for money without creating unnecessary bureaucracy.”

Another recommendation in the report called for councils to be given more freedom to build homes outside of the housing revenue account.
It said that government should raise the guideline threshold for the number of council homes that can be built outside the HRA from 50 to 200 units.
The process for obtaining directions and consents needed from the secretary of state to carry out such building work should be simplified, it added.
But the review steered away from making any recommendations on the scrapping of HRA borrowing caps, a measure local government has consistently pushed for.

Peter Box, LGA housing spokesman said: “We still need the removal of the housing borrowing cap, as well as changes to Right to Buy, the creation of council-led local land trusts and meaningful incentives scheme to encourage developers to speed up building.”

Gavin Smart, deputy chief executive at the Chartered Institute of Housing, said: “The report is right that there is potential for councils to build outside their housing revenue accounts, but there is also huge untapped financial capacity in the revenue streams and asset base within those accounts which we are simply not using to full advantage.”

Photo (cropped) by Woodley Wonderworks