Devon Pension Fund and three unnamed local government pension funds have committed to an affordable housing partnership of two asset managers to create new affordable homes in East Devon.   

The properties in Exmouth will be part-funded by a commitment from the £6.1bn Devon Pension Fund, in a bid to increase its investment in affordable homes in the region, as well as grant funding from Homes England. The fund’s investment brings its holdings of residential properties in the South West to 745.

The investment is made through to Residential Secure Income LP, a shared ownership strategy by Thriving Investments and Gresham House. The managers have committed £11m, via a forward funding agreement, for the development of the 40 new shared ownership homes in Exmouth. 3West Group will develop the properties over 2025 and 2026, which will be highly energy efficient. 

 

Thriving and Gresham House set up an affordable housing fund management platform in November last year. This marks the second deal for ReSI LP.   

  

Ben Fry, fund manager of ReSI LP, said: “The transaction will fund the delivery of much needed affordable homes in Exmouth through Devon Pension Fund’s local mandate for investment into its region. The delivery of high-quality, energy efficient housing that is affordable to local residents generates meaningful social impact alongside robust financial returns for investors.” 

  

He added: “With a strong pipeline of projects ahead, we’re focused on expanding access to affordable housing in Devon and across the UK, working in partnership with a range of national and regional housebuilders, whilst also providing a blue-print for how [Local Government Pension Scheme] capital can deploy into local, place-based investment opportunities.”  

 

Local Government Pension Scheme funds may be given a mandate by central government to allocate a certain proportion of their portfolios to “local” investments, as proposed in last November’s pooling consultation. Many funds could comply with such a requirement by expanding property holdings in their respective regions.  

 

In September last year, Devon Pension Fund held about £431m worth of UK property. It noted that its UK property allocation increased to 7% when asset pool Brunel Pension Partnership put an additional £31.8m in two UK property funds at the end of September 2024. However, it noted at the time that the property allocation continued to be underweight, “and Brunel are looking for further opportunities on the secondary market to bring the allocation up to the target”. 

 

Brunel is currently facing a struggle for survival as it has been singled out by the government as not fulfilling its preferred pooling criteria, along with Access. Both pools’ respective partner funds have been asked to submit plans for what they will do by September this year.

How could pension fund capital change the housing market under 'local investment' requirements?