Michael Keaveney, Director of Land, Development and Acquisition at Grainger PLC, has spent nearly eight years helping to reshape the country's largest listed landlord into a focused, operationally driven Build-to-Rent specialist. In a wide-ranging conversation for Propcast, he covers the logic behind Grainger's in-house model, the progress of its joint venture with Transport for London and a detailed proposal for how social housing in England might realistically be funded. Keaveney arrived at Grainger two years after chief executive Helen Gordon, stepping into a business in the process of significant transformation. From a standing start of one delivered scheme in Barking, the business now has 9,874 BTR homes across England and Wales, underpinned by an operational platform built on a deliberate decision to keep operations in-house. "All of the staff in the buildings that we developed are our staff, they're Grainger people," Keaveney explains. "It gives you absolute control over the product that you're delivering and the customer relationship." The result is a business running typically at 96 to 98 per cent occupancy. "If you don't control that relationship in-house, it's very difficult to get to that data," Keaveney says. He is also clear about what Build-to-Rent actually is. "People misunderstand what Build-to-Rent is. It's not about buildings at all. It never was. It's about service and product," Keaveney says. The joint venture with Transport for London, operating under the Connected Living London banner, has taken longer to deliver than either party originally envisaged. COVID and the second staircase consultation both intervened. Keaveney is unapologetic about the decision to pause. "A single staircase building is perfectly safe, that's our view, it always will be my view if they're well-built and well-maintained," Keaveney says. He adds, on the question of proceeding with consented single-staircase buildings regardless, that Grainger will always build to the latest regulatory standard, and in the case of recent TfL schemes went back into planning with revised schemes to update them in line with the latest regulations. The revised schemes are now moving through procurement, with contractors on board for several. "We've got 1,500 homes at the moment with planning consents," Keaveney says, adding that the JV has also begun forward funding elements alongside housebuilders such as Barratt Redrow. Keaveney goes on to describe the broader TfL land bank as "untapped," though the binding constraint remains the same. "The big question really is to what extent, how much grant support do these developments need to make them viable?" That question of viability runs throughout the podcast discussion. On the comparison between Build-to-Rent yields and Gilts - ultimately the question of risk-reward in the sector, he is equally direct. Comparing the two, he says, "is a category error." "A nominal Gilt doesn't grow. It's not indexed. We've got growth inherent in the Build-to-Rent model," Keaveney says. The correct comparable, he argues, is the index-linked Gilt. "We're not in the game of second-guessing that the growth rate is going to be, for some reason, structurally different in the next 10 or 20 years," Keaveney adds. The political backdrop is, Keaveney acknowledges, genuinely difficult. He accepts it is "a difficult political sell" to be seen granting concessions to the private sector, tracing the problem back to a narrative that successive governments helped create. "The original narrative was entirely wrong," Keaveney says. "They've boxed themselves into a position whereby developers and private equity and private capital investing in housing is an inherent 'evil'." When regulation and cost make the baseline hurdle rate unachievable, he notes, development simply stops. "The private sector goes, 'Well, by the way, it's no longer viable. And so we won't be building,'" Keaveney says. He is equally frustrated by the failure to interrogate the scale of bad practice with any rigour. "No one asks what percentage. How much of the market acts like that?" Keaveney says. "I'm absolutely convinced that if we were building 200,000 homes a year in the private sector, you would never hear, 'Well, what percentage of those homes are defective?' At the moment you just hear about the defective ones," he adds. It is on finding sustainable financing solutions that Keaveney's thinking has recently been focused. The report, "Homes for People We Need," published in the latter part of last year and to which Keaveney led on, was written out of a growing concern that the debate around social housebuilding was proceeding without any serious engagement with what it would actually cost. "I was getting really concerned over a period of a year and a half of hearing people call for 90,000 social homes and then making the statement, 'And we've got the money, we just need the will,' and thinking, 'I don't think you understand how much money that is,'" Keaveney says. "If you understand the cost and value of rental housing, which obviously Grainger does, you understand fundamentally the lower the rent, the lower the value of the home. And therefore the lower the rent you want in terms of affordable homes, the bigger the gap you're creating for viability," Keaveney explains. Low rent, in other words, requires a larger subsidy. That basic relationship was the impetus for the report. The numbers it produces are considerable. Modelling across all 295 local authority areas in England, covering one-, two- and three-bedroom flats as well as houses, and assuming a 50-50 split between suburban and urban development, "the ask is, in practice, £18.84 billion of grant per year to achieve 90,000 homes," Keaveney says, equating to roughly £209,000 per home. Beyond the grant requirement, "if you want to build 90,000 social homes, you also have to find nine to ten billion pounds of capital willing to invest in the income," Keaveney adds. He is also blunt about a widely held misconception: the idea that social homes will pay for themselves over time is, he says, simply wrong. "They will not justify the capital cost," Keaveney says. The registered provider sector, meanwhile, needs attention in its own right. "RPs need to be recapitalised to deal with today’s challenges and to add to housing supply," Keaveney says, pointing to the combination of net-zero obligations, Awaab's Law requirements and withdrawn retrofit funding as leaving many providers caught between competing pressures. As for where the money comes from, conventional routes are, in his view, largely exhausted. "We are tapped out of the bond market and we've taxed everyone to the top of the Laffer curve. So you don't have the ability to use tax or borrowing, which would be cheaper money, so you need to find a way. Tax credits are the way," Keaveney says. The mechanism he proposes draws on the American Low-Income Housing Tax Credit model. Corporations would be able to purchase future tax credits at a discount, generating immediate capital for the Treasury while locking in a lower long-term tax liability for the buyer. The implied return for a purchasing corporation is around seven per cent. In effect, the Treasury gets more money at the start, because companies pay part of their future corporation tax early. But over the next ten years it then collects less tax than it otherwise would have done, because those tax credits are used up. The question is whether the savings generated by the programme outweigh that shortfall. Keaveney's answer lies in the cost of temporary accommodation, currently running at around £2.3 billion a year and rising. Rather than comparing that saving against a conventional Gilt, he argues it should be treated as an index-linked liability. Were this to be capitalised at the index-linked Gilt rate prevailing at the time of the analysis, approximately 1.25 per cent per annum, the figure would have come to around £180 billion. "Enough to build, by my numbers, a million homes in social rent for just getting rid of the temporary accommodation bill," Keaveney says. Add the reduction in housing benefit and the tax revenues generated by construction activity, and the fiscal case becomes, he believes, credible. The remaining question is whether the Office for Budget Responsibility would treat the mechanism as off-balance sheet, in the manner of PFI. "What we're trying to get at the moment is an acknowledgment from the Treasury and OBR that this would be off-balance sheet," Keaveney says. "And if it's off-balance sheet, then you have effectively... someone said this to me the other day, they said, 'This would be the Holy Grail.'" Plans of this scale, Keaveney notes, run over ten to fifteen years, outstripping any single political cycle, and will only succeed if they attract genuine cross-party support. The commercial and political case, as he sets it out, is carefully constructed. Whether the will exists to match it is, as of yet, an open question and one that Westminster has been reluctant to answer so far. Keaveney closes on something more personal. The son of Irish parents who came to London in the 1960s, his father a carpenter, his mother having left school at fourteen, Keaveney grew up watching his parents build a life through hard work and good fortune. Members of his own extended family grew up in council housing and went on to build successful careers. "Good quality homes may not help the parents immediately, but it definitely helps the kids," Keaveney says. It is a reminder that behind the subsidy calculations and the balance sheet arguments lies a straightforward conviction: that housing is not just an asset class, and that where people live shapes what becomes possible for them.
