A German global real estate investor planning to spend £1bn developing 4,000 new affordable homes across UK regions has told CM about its rationale for the move, saying “unequivocally, we think devolution is making the UK more investable”.
Andy Burnham revealed the plans by investor Patrizia on 8 October at the first UK-Germany Regional Growth Forum in Berlin.
“Growth has to reach every part of the country, not just a few places,” the prime minister said. “Germany has shown what strong regions and local leadership can achieve, and we want to learn from that and share our own experience.”
Gus Wiseman has been Patrizia’s UK director of product since February this year. He was previously global head of investor relations at the Office for Investment, a joint unit of No. 10, HM Treasury and the Department for Business and Trade.
He told CM that Patrizia sees “an incredible opportunity” in affordable housing despite complaints about the worsening viability of housing schemes due to rising costs and regulation.
One reason is devolution, which allows mayors and local authorities to champion and invest in local housing schemes.
Another is pension reforms that steer local government pension schemes toward investing locally.
‘Strong regional leadership works’
“Unequivocally, we think devolution is making the UK more investable,” said Wiseman. “We think that mayors are staying in their posts for longer. The mayoral systems are relatively stable. Our experience, especially of Germany, which is a very regional and federal structure, is that strong regional leadership works.
“Most of those mayoral areas in the UK have been creating growth plans and, actually, they’re really good documents and they give us a strong sense of their ambition, their track record, their credibility. So we’ve been speaking with mayors and asking them what the projects are which are most important to them.
“We then overlay that view… with some of our analysis on the locations. And we’ve got our own data and intelligence system that’s again built up from many years of managing the data of the housing projects that we have and what people look for, what the desirability characteristics are of specific locations in relation to their amenity.”
Local co-investment
A crucial factor is devolved local governments being willing to co-invest, Wiseman said.
“They’re using funding from the National Housing Bank, from Homes England, and through the mayors’ controlled funds to help invest and share risk of these projects which are most important to them.
“That’s really important to us because it can help fundamentally, it helps make the risk and return dynamics different for these projects, that they’re able to give us a little bit more certainty of the public support around these schemes when they invest. By providing either debt or equity into the schemes, that can turn a marginal scheme into an investable scheme for us.”
Finding ‘forever owners’
Another factor is having an exit strategy, Wiseman said, and this is where local government pension schemes come in.
“Capital that’s taking development risk often does need to exit those rental housing projects to the right forever owner, which may be an insurance fund or a local government pension scheme, for example, or it might be a housing association.
“Through the pension reforms which have been happening over the last several years, like the Pension Schemes Act 2026, local government pension schemes have an objective around place-based investment. So they’re looking to invest in high-quality housing in their own areas.”
He said the opportunity to “exit out to local government pension schemes gives us the confidence to invest in strong schemes across the UK”.
Learning from Germany
Wiseman said Patrizia has long experience with regional investment systems such as in Germany, where regional pension funds often invest in local housing.
“They’re not doing that out of any particular type of loyalty,” he said. “They’re doing it because it makes the most sense, because they can get a strong risk-adjusted return. They have an advantage as local investors because they can identify opportunities faster, assemble the right teams to execute on those opportunities faster, and manage risks and challenges when they emerge faster.
“We see those same characteristics taking root here. In the UK, we call it place-based investment. In Germany, it’s never been called that, but it’s essentially the same thing.”
He added that the combination of devolution and a new appetite for regional investment has “fundamentally altered the investability of regional UK, and that’s the big opportunity that we see”.
‘We’re in a hurry’
Wiseman wouldn’t be drawn on specific timings, but said: “I feel comfortable saying that absolutely this is a plan for 2027.
“We are deep in discussion with not just several developers, but also several mayors on investment schemes within their areas.
“You know, we’re really glass-half-full investors. There seem to be so many people underselling the UK and always looking for a reason not to do things. And actually, we think that there’s plenty of reasons to do things.
“We’re in a hurry. We’re working with partners at pace who are similarly optimistic and similarly action-oriented to us. ”
