Octopus Investments’ affordable housing fund, launched in November 2023, has raised £242.5 million in its first year and is optimistic about matching that figure over the next 12 months, according to Jack Burnham, head of affordable housing at the firm. The fund, which recruited Georgia Kirby-Watt as operations director from Grainger in June 2024, has set an ambitious long-term goal to raise £1 billion over the coming years.
“Affordable housing is resonating with investors right now,” Burnham said, highlighting the combination of stable, resilient income and measurable social impact as key attractions. Current investors include six local government pension schemes and £10 million from impact investor Better Society Capital. Burnham noted the growing interest from other sectors, such as endowments, international capital, and additional pension funds.
The fund’s capital is deployed through NewArch Homes, a for-profit housing provider acquired by Octopus in 2022. As of 2024, NewArch had 400 homes either completed or under construction, with two-thirds of them designated for social or affordable rent, and the remaining third for shared ownership. Burnham expects the NewArch pipeline to grow to 1,000 homes by the end of 2025, while maintaining the current mix of tenures.
NewArch contracts out the management of its homes to housing associations, with four or five such agreements in place, including with Flagship Group. Pinnacle Group is also managing 59 NewArch homes across Peterborough and Exeter. Burnham indicated that another formal partnership with a housing association is set to be announced shortly, covering both existing and in-development properties.
NewArch is also venturing into the innovative “zero-bills” housing market, with its first site set to incorporate smart tariffs developed by Octopus Energy. These homes will feature heat pumps, solar panels, and battery storage, with further details expected in the spring.
While NewArch currently does not have dedicated retirement properties, Burnham emphasized that the firm is actively exploring opportunities in the older people’s housing sector. However, he stressed that no more than one-third of NewArch’s properties will be for later living.
Due to the nature of its local government investors, who seek stable returns, Burnham noted that direct development is not currently a primary focus for NewArch. However, partnerships like the 180-home stock transfer with Golding Homes, completed in March 2024, have enabled the housing association to recapitalize and take on new development projects.
Additionally, the fund is looking to expand through acquisitions of Section 106 homes—properties that were initially intended for private sale but can be converted to affordable housing with grant funding. “Can we take some grant funding and make that affordable housing?” Burnham asked, pointing to this as a key part of the fund’s strategy.
To ensure the quality of Section 106 homes, NewArch has focused on low-rise, single-family homes, which Burnham believes offer fewer risks than larger, high-rise developments. The company also boasts in-house development expertise, ensuring high-quality delivery at each stage of the process.
Burnham expressed a desire to invest in geographical areas where investors are located, with Devon’s local government pension scheme contributing £40 million to the fund in July. NewArch completed its first homes in Devon just before Christmas, a move Burnham described as “resonating quite nicely,” although he acknowledged that it represents a minority of the fund’s overall activity.
The fund’s growing success and diverse investor interest demonstrate strong momentum for Octopus Investments’ affordable housing initiative, as it seeks to scale its impact and reach its £1 billion target.
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