APPG for SME Housebuilders and APPG for Pensions and Growth: Joint Roundtable on Pension Fund Investment in Housing
The APPG for SME Housebuilders and the APPG for Pensions and Growth hosted a joint roundtable at Parliament in June, bringing together SME housebuilders, parliamentarians and pension fund representatives to discuss how pension fund investment could help unlock housing delivery across the UK.
The session examined the barriers currently preventing pension funds from investing more readily in SME-led schemes and explored what a workable framework between the two sides could look like.
Barriers facing SME housebuilders
Attendees raised several structural obstacles limiting SME access to institutional capital:
Land: landowners typically require minimum 50-unit schemes, putting smaller housebuilders at a disadvantage from the outset.
Section 106: affordable housing requirements are particularly onerous on smaller housebuilders, as registered providers often show limited interest in these schemes.
Skills shortages: a continuing shortage of skilled labour and business operators is placing growing constraints on delivery.
Equity, not debt: senior debt is available and competitive, but the equity, particularly the mezzanine layer, is scarce and expensive when it can be found at all.
Constraints on the pension fund side
Pension funds face their own limits. Fiduciary duty and regulatory requirements mean they cannot simply be directed where to invest, and smaller deal sizes increase per-unit costs in ways that can make fee structures unviable. A representative from a Local Government pension pool spoke about a pilot social housing scheme in the West Midlands which has a minimum 10% allocation directed to SME housebuilders, offering an early proof of concept for how SMEs can avail of investment from pension funds. The Mansion House Accord, which asks defined contribution schemes to direct 10% of default funds into productive assets, such as infrastructure, property and private equity, by 2030, is adding further momentum in this direction.
Areas of opportunity
Institutional investors previously looked for schemes of 200 or more homes but that threshold has dropped in recent years, opening a route for SME-scale investment. Aggregation would still be needed to deploy pension capital efficiently at this scale, and attendees saw this as a role for Homes England or a similar body.
Participants discussed several potential structures, including an SPV model in which a pension fund provides equity and a revolving credit facility supports an ongoing pipeline without requiring personal guarantees with a public body, such as Homes England, acting as a guarantor. Escrow arrangements and consortium models, including examples of housebuilders pooling resources to acquire sites jointly, were also raised as ways to bridge the gap between SME delivery and pension fund investment criteria.
The roundtable discussion made clear that SME housebuilders and pension funds are, in many respects, natural partners. Both are looking for stable, long-term returns, and both have a stake in delivering the homes the UK needs. What's missing is not appetite but the right structures to connect the two, along with easier routes into bodies like Homes England that could help build those structures at scale.
The APPG for SME Housebuilders and the APPG for Pensions and Growth will continue to work with attendees and the wider sector to take these ideas forward.