As a leading expert in construction with a deep understanding of design and architecture, Luca Calaraili has a unique perspective on the intersection of finance and the built environment. His passion for technological innovation drives his approach to solving one of the UK’s most pressing challenges: the shortage of social and affordable housing. In this interview, we explore the financial strategies and market forces shaping the future of the sector. We’ll delve into how ambitious funding targets are being met and expanded, the practical impact of innovative financial products like social loans, and the crucial interplay between private investment and public policy. Luca will also shed light on how these large-scale financial commitments translate into tangible outcomes, from energy-efficient retrofits to the construction of new homes that provide stability for thousands of families.
You managed to deliver on a £7.5 billion lending ambition a full year ahead of schedule and have already set an even higher £10 billion target. What specific market dynamics drove this rapid deployment, and how do you envision these new funds being used to address the most critical housing needs through 2028?
The acceleration was frankly driven by overwhelming demand from the market. We saw housing associations ready to build and expand, but they needed the right financial partnerships to make it happen. Reaching our goal a year early wasn’t just a milestone for us; it was a clear signal that the sector is primed for growth. Looking ahead to the new £10 billion ambition, the focus is twofold. First, we must address the acute shortage of new social homes, which is directly linked to the rising homelessness figures. We’ll be working with partners to get new, high-quality homes built. Second, we can’t ignore the existing housing stock. A significant portion of these funds will be channeled into upgrading and retrofitting older properties, not only to improve living conditions but also to enhance their energy efficiency, which is a critical need for both the environment and for easing the financial burden on residents.
Your funding supports a wide range of activities, from brand-new construction to upgrading existing properties with energy-efficiency retrofits. When you work with your housing association partners, how do you collectively decide where to prioritize investment, and what does success look like when comparing the impact of a retrofit to that of a new home?
It’s always a balancing act, and the decision is made in close partnership with the housing associations, who know their communities best. We look at their specific strategic plans and the immediate needs of their residents. Prioritization often comes down to a blend of urgency and long-term value. For instance, the data from Shelter showing nearly 400,000 people are homeless creates an undeniable urgency to build new stock. However, a deep retrofit of an older building can secure a family’s home for another generation while drastically cutting their energy bills. We measure success differently for each. For a new build, the primary metric is simple: how many families are we able to move out of temporary accommodation and into a stable home? For a retrofit, we measure the tangible impact on living standards—things like improved energy performance certificates, reduced carbon emissions, and, most importantly, the financial savings passed on to the tenants.
The social loan fund that supported the housing association VIVID is a great example of an innovative financial tool, using incentives like discounted interest rates. Could you walk us through how a mechanism like this works in practice and how those savings translate into real-world benefits for communities?
Absolutely. The VIVID deal is a perfect illustration of how finance can directly fuel social good. In simple terms, we offer a loan with significantly lower interest margins and waive the arrangement fees. For an organization like VIVID, which is managing massive capital projects, these savings are not trivial—they amount to very significant sums over the life of the loan. Instead of that money going toward finance costs, it stays with the housing association. VIVID can then directly reinvest those savings into its core mission. In their case, the £100 million facility is enabling the construction of 450 new homes specifically for social rent. It’s a virtuous cycle: the financial incentive we provide reduces their costs, which frees up their capital to build more homes and improve more lives.
With recent government commitments, such as 10-year rent certainty, designed to unlock development, how does this public sector agenda influence your private lending strategy? Could you give an example of how a policy like that affects your risk assessment when financing a large-scale housing project?
The government’s role is absolutely fundamental, and policies like 10-year rent certainty are a game-changer for us as a lender. When we assess a large-scale, long-term loan, our biggest concern is the predictability of the borrower’s income stream. For a housing association, that income is rent. If the rent regime is subject to change every year, it introduces a significant level of uncertainty and risk into our financial models. However, when the government guarantees a clear rent policy for a decade, that risk is dramatically reduced. It provides the stability we need to commit billions in funding with confidence. The 10-year term on the loan to VIVID, for example, aligns perfectly with that policy certainty, creating a stable, predictable environment for long-term investment in much-needed housing.
The data on homelessness is stark, highlighting a profound shortage of social homes. Beyond the critical role of financing, how does your broader “Growing Together” plan help address the structural barriers that keep families from accessing stable, long-term housing?
Financing is the fuel, but it can’t clear the road on its own. The “Growing Together” plan is our recognition that this is a complex, systemic issue. We use our position to do more than just write checks; we bring people together. This means convening conversations between housing associations, local policymakers, and developers to identify and tackle those structural barriers. It’s about sharing expertise, championing the most effective mid-market construction companies, and ensuring that infrastructure and housing are developed in a coordinated way. We see ourselves as a partner in building the foundations for growth across the UK, and stable, affordable housing is the bedrock of that foundation. By strengthening those connections, we help create a more efficient and responsive system for delivering the homes that families so desperately need.
What is your forecast for the UK social housing sector?
I am cautiously optimistic. The demand is undeniable, and the alignment between government policy and private sector appetite for investment is stronger than I’ve seen in years. We’re seeing real innovation in financing, like the social loan products, which is making a tangible difference. However, the scale of the challenge is immense, with hundreds of thousands of people still trapped in temporary accommodation. My forecast is that we will see a significant acceleration in the delivery of new social and affordable homes over the next five years, driven by these collaborative funding models. The key will be maintaining this momentum and ensuring that investment continues to flow not just into new builds, but also into making our existing housing stock more sustainable and fit for the future.
