Why is it that private investors are so keen to get into social housing?

Britain’s housing crisis has rumbled on in the background of a dismal election campaign, rearing its head occasionally without ever quite making it into the highlights. Or rather, the lowlights.

That’s unfortunate because the country is failing badly when it comes to providing sufficient numbers of homes that people can afford to live in.

The grim consequences of that failure can be seen on the streets of our towns and cities. The Independent recently reported figures showing that a homeless person dies every 19 hours. There’s also a vast unseen underbelly of people living in temporary or unsuitable accommodation.

Could private money help? At first blush, this seems counterintuitive. Why would investors have any interest in the provision of homes at below market rents, which is what you have to do to qualify for one of the various categories within the “affordable” sector?

Yet Legal & General, the investment company, has just announced that it’s partnering with 14 mainly small and medium-sized housing associations to deliver a pipeline of 3,500 of these and restated its medium-term ambition to put up 3,000 more every year.

The current tranche is made up of a mix of properties, of which 25 per cent are classified as “social rented housing”. This is where rent is set at 30-60 per cent of local market rates. Wherever the number may fall within that range, it always has to be capable of being fully covered by housing benefit.

Another 25 per cent will be offered at “affordable rents”, generally between 60 and 80 per cent of the market. The balance are shared ownership properties.

It’s worth noting, that although there’s a shortage of all of them, the really pressing need is for more homes in the first of those categories. We’ll return to that subject later.

What does this company want with them? In a word, income. Income is a commodity much valued by the likes of pension funds, which invest their money with the likes of L&G. But it’s something that’s proving hard to find on the world’s investment markets. Interest rates are at historic lows. The yield on UK government 10-year bonds, or Gilts, recently fell below 0.5 per cent for the first time.

The response when I asked how much income these homes will produce for L&G’s investors was vague. Two, three or four per cent is what I was told. Even the lowest of those figures is better than what Gilts currently offer, however.

Another reason L&G is getting involved is that the risks with this sort of investment would appear to be quite low. It isn’t hard to find renters for these sorts of properties. Waiting lists are so long they make War and Peace look like a candidate for inclusion in an anthology of the 101 best short stories.

Nonetheless there are problems with the arrangement.

The company argues that we need a lot more homes than are being built at the moment. It has the capital to help make it happen. Where’s the issue?

Inside Housing has, however, reported that some non-profit housing providers have complained about being outbid for what are known as section 106 housing schemes by for-profit rivals, of which L&G is one. For the record, Ben Denton, the company’s affordable homes chief, says his team gets beaten by housing associations on 90 per cent of the schemes they bid on. Make of that what you will.

But there’s also the question of whether the L&G model is really helping to address Britain’s housing needs. After all, only 25 per cent of them are in the cheapest category, “social” rents. It says these are subsidised by homes in the higher yielding categories, particularly the shared ownership homes, and that the company isn’t any different to a housing association in that respect.

If that’s so, then perhaps the model needs to be reassessed. When it comes to affordable homes, shouldn’t we be looking at prioritising the areas of greatest need first rather than ensuring investors get their yield?

Which brings us neatly to the moral, maybe ideological, problem. It is the question of whether it’s right for this sector to be used for the purposes of making profits from the poor.

L&G says there’s no difference between a home provided by its capital from one provided by a housing association, which mostly borrow to fund their developments. The rent is the same in both cases. It’s regulated and capped. L&G says it can make a profit because it can access capital more cheaply and efficiently than its not-for-profit rivals.

But the state can borrow at less than 1 per cent. So shouldn’t it be taking the lead here? If it did so, wouldn’t we be able to build more homes in the cheapest social rent category? The ones needed to get people off the streets?

A serious and concerted effort by government could, in theory, fix this. What’s lacking is the will, possibly as a result of an ideology that holds that the state shouldn’t get involved in this sort of thing, or anything really.

It’s worth noting that when the now-chancellor Sajid Javid had a rare good idea – he suggested allowing councils to borrow to build while serving as communities secretary – it was swiftly knocked on the head.

Like it or not, L&G’s income looks set to keep on flowing.