New Stable
Work in progress
New Stable
Expanding and reforming the role of the Local Government Pension Scheme (LGPS) in driving forward housing investment in the new parliament.
Solving the housing crisis, a stated but unrealised goal of successive recent governments, is both a generational challenge for policy and a hugely significant potential investment in place. That a crisis exists is well-rehearsed, but its hydra-like, multifaceted nature must be stressed. The housing crisis is principally one of supply, with not enough homes being built in general year-on-year. Beyond this, however, is the crisis over the type of homes being supplied – with far too few genuinely affordable and social homes being built. This means that an uptick in supply itself without further intervention will not alleviate the problem. There are also myriad effects of the crisis and the vicious cycle they create: the pressure on services such as temporary accommodation caused by homelessness, the enormous and unequally distributed downwards pressure on disposable income caused by escalating housing costs.
It is for all these reasons and more that the new government have placed the delivery of homes at a scale not seen in decades at the centre of their agenda for this Parliament, with much of the responsibility sitting on the shoulders of local authorities. The Local Government Pension Scheme (LGPS) is cited by the chancellor as a key means to achieve investment.
A major and commonplace question for policy going forward in this context is how best to facilitate this investment from the LGPS’s £400bn assets, taking into account the LGPS’s fiduciary responsibilities. However, a less well-trailed fact is that the LGPS has, according to Isio, a surplus of over £100bn at the moment which could, via a reduction in local authority pension contributions, could provide more direct funding.
If well managed, in the correct regulatory and policy environment, the LGPS could provide a combination of financing and funding at the local level to a much greater scale than envisaged and more quickly, with government capital and private finance coalescing around these investments with multidimensional socio-economic returns.
New Stable is a research project examining how the LGPS can best be used in innovative and imaginative ways to support the growth in affordable housing and associated infrastructure, whilst retaining fiduciary integrity.
Why New Stable? It’s a play on words covering our link from LGPS pensions to housing.
- LGPS employer pension contributions are generally considered to be best kept stable. However, given the huge market changes since 2022, is there a new, lower stable rate for the future?
- In the context of affordable housing, a stable is a simple, safe place, with a roof over the heads of those inside. We need more of these.
Key research questions include:
- What role should the LGPS’s current assets ideally play in in accelerating housing delivery?
- What are the characteristics of a potential investment which make it most attractive to LGPS funds and how can housing investments be designed to provide a good fit?
- How can we properly measure the full ROI on investing in new housing delivery?
- With regards to ‘stable contribution’ what would an alternative view look like in which it could be seen what rates provide long-term sustainability with a measure of prudence?
- What are the risks of the LGPS holding excess reserves (pensions surplus) now versus the risks of the LGPS not being well enough funded in the future? Should this be considered using Value for Money principles?
- Is there an opportunity to utilise some LGPS surplus more quickly in the short to accelerate meeting the UK’s housing needs?
- How might LGPS pensioners, local authority employers and local council tax payers respond to lower pension contributions? Would ringfencing some or all of these help?
- What alterations are needed to the regulatory and policy framework for the LGPS (investments and funding) to encourage housing delivery from pension funds?
- How can councils collaborate with their pension funds to drive targeted housing growth? How will the enlarged mega pools view local?
- What level of state funding is required to ‘crowd in’ private investment in housebuilding programmes?
- How does housing compare to other UK investment opportunities?
Project in association with:
