More than £52 million in public money reserved for social housing is at risk following the partial collapse of one of England's fastest-growing housing providers. Two investment companies run by the Heylo Housing group, which is backed by asset manager BlackRock, have entered administration. This has left the government regulator scrambling to find a rescue deal to protect taxpayers' money and prevent 3,500 social homes from switching to the private sector.
Regulatory Failures Exposed
The situation has exposed serious flaws in the deregulation of housing conducted by the previous government. It has raised questions about attracting new investors into social housing and giving public money to for-profit companies. The case also presents an unprecedented challenge for the Regulator of Social Housing (RSH), which oversees landlords of 2.9 million social homes. The RSH risks tarnishing its record of never having lost a single property or any public money to a financial default.
One of the companies, or investment pods, in the Heylo group went into administration owing £46.46 million in unsecured credit to Homes England, the government agency that allocates public money for social housing. The other company owes Homes England £6.21 million. Homes England has estimated its total grant exposure is nearer £43 million. This grant was provided from 2018 to 2023 under its shared ownership affordable homes programme, where residents could buy a partial share and pay rent on the remaining share.
Potential Loss of Public Funds
The grant is typically recycled when repaid to fund more social homes, potentially supporting about 500 new homes for social rent. However, it would be lost if an insufficient bid is made for the stricken companies. The administrators, PWC, have assured about 3,500 residents in more than 100 council areas that they will not lose their homes and should continue paying their mortgage and rent as usual.
The regulator hopes the homes can remain in the social housing sector if it can persuade another regulated landlord to buy the stock, similar to when the black-led provider Ujima was taken over by L&Q. The RSH's powers, including appointing its own administrators, have helped reassure lenders who have invested a combined £130 billion in the sector.
Complex Structure Hinders Oversight
Heylo's case is different because the part of its structure registered with the regulator does not own the homes involved. Instead, it leases them from six investment companies, including the two that have gone into administration. Additionally, the investors or these companies appointed the administrators, not the RSH. PWC has a duty to protect the funds of investors—BlackRock and two pension funds, Phoenix Life and the Universities Superannuation Scheme—but this duty does not include keeping homes in the social housing sector as RSH administrators would.
The RSH raised concerns about Heylo's structure since it was founded by Giles Mackay. In 2022, it warned the structure was too risky because registered providers had no control over the homes. Mackay had a similar dispute with RSH over his previous company, Assettrust, whose investment companies went into administration in 2014 after RSH shared concerns about its viability and governance.
Deregulation Reduced Powers
The regulator now has fewer powers to intervene. Under deregulation introduced in 2017, Mackay was able to buy an existing registered provider and add a complex structure of investment companies. This acquisition arguably gave Heylo the benefits of regulation, including successfully bidding for public money, but its structure offers no public oversight over the homes this money paid for.
According to RSH, Heylo's difficulties demonstrate why this loophole should be closed. Chief executive Jonathan Walters said: "It highlights the importance of going through full registration so potential issues can be identified early—rather than bypassed through acquisitions. By leasing homes from investment pods, Heylo RP was less able to assess and address risks, and unable to protect tenants' homes when problems developed."
Paul Kershaw, chair of Unite's housing workers and a former regulator employee, said: "In this situation it's going to be difficult to find a saviour. The structure of the company is the risk for the regulator. Who picks up the tab when things go wrong? The investors, like BlackRock, want the profit when things go well, but they don't want the risk." Kershaw claimed the regulator has been under political pressure to register for-profit companies to increase building new homes. "Heylo shows the risk associated with that approach," he said.
Uncertain Future for Homes
The RSH, investors, and administrators hope Heylo's homes can stay in the social housing sector and at least partially protect the public grant. However, this outcome is far from certain, and at least some of the public money may have to be written off. Walters said: "Because the pods own the social homes but are not regulated by us, we do not have a formal role in the administration. But we are working closely with the administrator to support a resolution that safeguards the long-term future of these homes."
A spokesperson for Heylo said: "The team at Heylo is working closely with the administrators, and our customers remain our top priority to ensure a smooth and orderly transition. As this is an ongoing matter, we are unable to comment further at this stage."
