Falkirk pension fund affordable homes investment hailed as a ‘trailblazer’
Falkirk Council’s Local Government Pension Scheme Fund has awarded fund manager Hearthstone Investments £30 million to invest in social and affordable housing in Scotland.
Over 300 affordable homes are expected to be delivered with the Scottish Government providing an initial investment of over £6m towards 126 social homes in Falkirk and Clackmannanshire.
Hearthstone predicts its ‘Housing Fund for Scotland’ fund will achieve £150m total investment from a number of pension funds, delivering over 1,000 affordable and private rented homes.
Hearthstone will provide funds on commercial terms to housing associations with an appropriate credit rating to be directly invested in social housing.
The fund manager will also purchase affordable homes to be let as mid-market rent homes by housing associations, for around 10 years.
Edinburgh-based housing association Castle Rock Edinvar, which is part of Places for People, is the delivery partner for Hearthstone, will manage the initial building programme for social rent homes.
Hearthstone has agreed a £15m loan facility with Places for People as part of the Falkirk Local Government Pension Scheme Fund investment.
The 11 Local Government Pension Scheme funds across Scotland hold investments worth more than £30 billion in a range of assets that ensure they are able to meet pension payments when due. Investment in housing is one option that the Scottish Government is keen to see pension funds explore.
Social justice secretary Alex Neil said: “This government has developed a range of pioneering approaches at maximum value for taxpayers’ money to tackle Scotland’s housing challenges.
“The £30m Falkirk Local Government Pension Scheme fund investment will, I believe, act as a trailblazer and encourage other Scottish local authority pension fund trustees to take the plunge and invest in housing.
“This investment demonstrates that Scotland has taken a lead in the UK at looking at new ways of funding the homes people need.
“For an acceptable risk profile, investment will provide pension funds good, long-term returns for their members and a social investment to help build stronger communities.
“In the future, the scale of investment from pension funds could be significant. We will continue to support proposals that are credible, offer scale and have partners across the public and private sector aligned and ready to work together to deliver much needed housing investment across Scotland.”
Councillor John Patrick, convener of Falkirk Council’s Pensions Committee, said: “Funding housing projects through the pension fund is an original idea and is testament to the creative thinking of the council, the Pensions Committee and our partners who have helped get this idea up and running.
“It’s great that we can build 96 properties without it having any direct financial impact on the Council but still help those tenants looking for an affordable home.”
Christopher Down, chief executive of Hearthstone, added: “The Housing Fund for Scotland will help address the need for new housing supply in Scotland, delivering over 1,000 professionally managed homes in the affordable and private rented sectors.
“We are delighted to be launching this new fund in conjunction with Falkirk as the lead investor, and welcome the support expressed by Scottish Government today.
“Residential property offers stable, long-term investment returns, and has historically been a very good inflation hedge, making it ideal for pension funds as part of a multi-asset portfolio.”
Leader of Clackmannanshire Council, Les Sharp, said: “I welcome the announcement from the Scottish Government of additional grant support and pension fund investment. As public finance is restricted, it is a priority for us to look at new ways of funding affordable housing with the minimum necessary public subsidy.”
Alister Steele, managing director of Castle Rock Edinvar, added: “We are delighted to have brought local authority pension fund investment to increase the supply of new social housing in Scotland. It demonstrates our potential to benefit from Places for People’s financial strength and expertise alongside our capacity for local delivery.”