SUMMARY:
After an Autumn Budget where there was little focus on housing as an engine for growth, the Chancellor's Mansion House speech this Thursday is important - will it set out how the government plans to maximise investment into the UK's housing and housebuilding industries?
The Chancellor's Mansion House speech on Thursday 14 November 2024 is expected to outline important changes for pension funds in the UK.
There have been reports that local government pension funds may be merged – and that a proportion of investment will have to be allocated to UK assets.
In that context, the Pensions and Lifetime Savings Association (PLSA) have recently published a report on some policy choices that might support investment in UK opportunities: https://www.plsa.co.uk/Portals/0/Documents/Policy-Documents/2024/Pensions-and-Growth-Report-PLSA-2024.pdf
Over the last few decades, large scale Private Finance in social and affordable housing has topped £120billion. This has been made possible through a regulatory, financial, tax and legal framework that encourages and supports private finance investment into housing associations and other registered housing providers.
In relation to social housing, the PLSA report rightly notes that pension funds already invest significantly in social housing bonds and this is seen as an attractive investment by pension funds.
As is often said, there is a wall of money ready to be invested in UK housing – so it's important to understand the regulatory, financial, tax and legal framework that can help to boost investment.
The strategy behind mandatory investment proposals is clear – for pension scheme investment (particularly public sector pension schemes) to be used as a form of sovereign wealth fund for investment in UK assets. The extra investment, it is hoped, will lead to increased economic growth for UK plc.
The issue is the best way to encourage investment into the UK. Compulsory allocation to the UK may not be the best way and may even be counterproductive over the long term. A better way forward might be to make investing in UK assets more attractive. For housing that would mean creating a more sustainable and effective platform. To back a regulatory, financial, tax and legal framework that encourages more large scale investment and unblocks the barriers to faster housing delivery.
Housing is hugely capital intensive – getting the right environment for large scale and sustainable investment is critical. It's important to remember that while UK pension funds are big, global capital is enormous. If UK housing investment is made globally attractive there is a huge pool of investment to be tapped. This is why, after an Autumn Budget where there was little focus on housing as part of the engine for growth, the Chancellor's Mansion House speech is important to set out how the government plans to maximise investment into the UK's housing and housebuilding industries.