Investment of an additional £118 million by UK pension funds in the Octopus affordable housing fund
Octopus Capital Affordable Housing Fund Addresses UK's Social Housing Shortage
The UK is facing a significant shortage of social and affordable homes, with over 1.3 million people waiting on social housing registers and home ownership among young people having halved in the last 35 years. However, a new initiative, the Octopus Capital Affordable Housing Fund, is aiming to address this issue.
In July 2021, the government published a policy paper on "delivering a decade of renewal for social and affordable housing," setting an ambition to deliver around 300,000 social and affordable homes through its new Social and Affordable Homes Programme. The government has committed £39bn to the sector over the next decade to achieve this goal.
The Octopus Capital Affordable Housing Fund, launched in 2021, aims to raise £1bn in investment by 2026 to accelerate the delivery of good-quality, affordable homes built to robust sustainability standards. The fund has already made significant strides, having raised over £360 million in total funds under management as of late July 2025.
Three UK local government pension schemes, Strathclyde Pension Fund, London CIV, and Avon LGPS, have committed a combined £118m to the fund, joining the £50m from the Strathclyde Pension Fund and £58m from London CIV's previous investment. Octopus Capital's fund remains open to new commitments.
NewArch Homes, a subsidiary of Octopus Capital, is a for-profit provider of housing in various sectors, including social rented, affordable rented, and shared ownership. The company now owns 500 affordable homes and is one of the ten largest for-profit registered providers of social housing in the UK.
The fund incorporates ESG (Environmental, Social, and Governance) principles by adopting the Sustainability Reporting Standard for Social Housing (SRS), ensuring transparency and robust sustainability reporting aligned with sector best practices.
However, it's worth noting that the government's policy paper does not provide specific details on how it plans to achieve its targets for social and affordable housing delivery.
The scale of the problem being tackled is evident, with over 165,000 children living in temporary accommodation in the UK. Achieving the goal of delivering 300,000 homes would require delivering around 180,000 homes for social rent, which is six times more than were delivered in the decade to 2024.
The Octopus Capital Affordable Housing Fund is a rapidly growing initiative backed substantially by UK pension funds, driving large-scale affordable housing projects with strong sustainability credentials and aiming to bridge the UK's chronic affordable housing gap by 2026.
- The Octopus Capital Affordable Housing Fund, with a goal to raise £1bn by 2026, is investing in affordable housing to help address the significant social housing shortage in the UK.
- By incorporating ESG principles and adopting the Sustainability Reporting Standard for Social Housing (SRS), the Octopus Capital Affordable Housing Fund ensures transparency and sustainability in its real-estate business.
- Despite the government's target of delivering 300,000 social and affordable homes over the next decade, there is a need for private equity, like that provided by the Octopus Capital Affordable Housing Fund, to bridge the chronic affordable housing gap in the UK.
- With the UK housing market facing challenges, such as the growing number of children living in temporary accommodation (over 165,000), it's crucial for businesses and funds, like the Octopus Capital Affordable Housing Fund, to focus on affordable housing solutions to contribute to the biodiversity and overall social impact of the country.
