What went wrong at Heylo?

Inside Housing Living has spoken to senior leaders across the housing world to paint a clearer picture of what really happened at Heylo. 

Its situation is a unique one, but it comes at a time when housing associations are increasingly buying from, selling to and partnering with for-profit providers.

All social landlords, therefore, should be invested in what happens to Heylo’s homes. Will they stay in the affordable housing sector, or could they be sold to a private owner? The answer may require a reassessment of the entire for-profit affordable housing landscape.

Where it all began

A new company enters the affordable housing market focused on shared ownership. It promises an innovative way to deliver homes, using private finance to buy new builds from house builders through Section 106 and bulk purchase.

After growing its portfolio for a decade, there is a dispute between the company and its investors over a restructuring. The company’s principal lender says the threat of liquidation means there is “no other option available” but to appoint administrators to the company’s subsidiaries.

A team at PricewaterhouseCoopers (PwC) led by David Baxendale digs through the subsidiary companies’ finances and begins to sell their homes. Residents are told that their tenancies will continue with minimum disruption.

Questions are asked in the media. “What scrutiny, if any, should there be around private providers acquiring affordable homes that fall outside of the [regulator’s] remit?” asks Social Housing magazine.

But this isn’t the story of the recent Heylo administrations. This is what happened a decade ago to Assettrust Housing, Heylo’s predecessor company.

Assettrust was established in 2004 by Giles Mackay, a former barrister and serial entrepreneur. It built up a portfolio of just under 800 homes before its 18 subsidiary companies fell into administration during the 2013-14 financial year.

Assettrust had tried to use a registered provider to access bond finance and acquire its portfolio, but was rebuffed by the regulator, which criticised its governance and viability.

Following the administrations, in 2014 Assettrust’s homes were sold to a mix of landlords within the affordable housing sector. Housing associations Genesis and Fortis Living bought two-thirds of the homes between them.

The remaining third were sold to Heylo, a new company set up by Mr Mackay with Lancashire County Pension Fund and fund manager Internos. (When approached by Inside Housing Living for this article, Lancashire County Pension Fund said it exited Heylo in 2021 and had no further involvement in the business. Internos was sold to Principal Asset Management in 2018; Principal declined to comment for this article.)

Mr Baxendale is now leading the administrations of the Heylo subsidiaries, 12 years after he did the same with Assettrust. They aren’t quite the same: Assettrust had a different structure to Heylo, with more companies, and it was on a smaller scale. Even so, the circularity is striking.

Heylo’s structure

Heylo Group’s unique structure is crucial to understanding both the administrations and its longstanding dispute with the RSH.

Its registered provider – which Heylo acquired as a shell company, meaning it did not go through a registration process with the regulator – does not own any homes.

Rather, it leases homes from unregulated investment companies, or ‘pods’, within the Heylo Group. Each of these pods is backed by different investors, including BlackRock and other large insurance and pension companies. Heylo’s registered provider then onward-leases the homes to customers on a shared ownership basis.

There are three noteholders behind pods one and five, which are currently in administration. BlackRock is a lender to the subsidiaries in administration, Inside Housing Living understands, although it is not an investor in the wider Heylo Group.

The other noteholders are large commercial organisations that have significant investment elsewhere in the social housing sector. BlackRock declined to comment for this article.

Some housing sector leaders Inside Housing Living spoke to for this piece were sympathetic to the Heylo model.

They see it as an innovative solution that protects its registered provider and leaseholders while allowing multiple lenders to provide funding and house builders to market its homes. The non-compliant grades handed to Heylo in 2022 by the regulator did not give sufficient credit for this approach, they argue.

“This case reinforces the importance of meeting debt obligations. It also shows the importance of landlords having robust risk management arrangements and control over the social housing they provide”

It was also delivering homes. Heylo completed 806 homes in 2024-25, making it England’s third fastest growing for-profit affordable housing entity. This growth was accomplished without grant from Homes England; Heylo has not bid for central government affordable homes programmes since it was deemed non-compliant.

Other senior housing sources side with the regulator, which says Heylo’s structure does not sufficiently safeguard its homes. Since all the homes are outside the registered provider, there is little the registered provider itself can do to protect the homes and their residents if something goes wrong. The defaults bear this out, they argue.

All agree, however, that Heylo’s model is an outlier and that Mr Mackay is trying to do something different. He has founded 14 companies, including housing data company Hometrack, which he sold to Zoopla for £120m in 2017, the same year Heylo acquired its registered provider. He moved to Monaco in 2023, shortly after selling his Chelsea home to the president of the United Arab Emirates for £65m. 

Other large for-profit providers operated by Legal & General (L&G), Grainger, Sparrow Shared Ownership and M&G have managed to achieve top marks from the regulator. 

Like Heylo, L&G has created a structure that accommodates separate funders, but unlike Heylo, all its affordable homes sit within registered providers. (L&G has nine registered providers, three of which are funded by local government pension schemes and three of which use L&G’s own pension book.)

Who is to blame for the defaults?

How exactly the Heylo subsidiaries got into trouble remains unclear. Inside Housing Living understands that the insolvencies happened through investor-enforced security. In other words, the investors behind the affected pods appointed the administrators to protect their capital.

PwC’s press release states that its administrators are “acting in the interests of all creditors of Pod 1 and Pod 5” and, following the stabilisation of the companies, “intend to maximise value for the respective portfolios” through an orderly sales process.

The administrator’s language suggests this is a simple credit story: a failure of the pods to meet their loan agreements.

Heylo’s perspective is different. It says that to regain compliance with the RSH, the group had committed to transferring its asset-owning subsidiaries directly under its registered provider, with the purpose of giving the registered provider direct control. The investors of HH1 and HH5 did not agree to the restructuring, so administrators were appointed for these two pods.

In this telling, the regulator’s insistence on restructuring and the investors’ intransigence contributed to the pods’ troubles – implying that there is a regulatory element to the administrations.

Heylo told Inside Housing Living that it could not provide anyone to interview while the administration process continues. It pointed to its original statement on the appointment of administrators, which states that other entities within Heylo Housing Group remain unaffected.

The regulator’s view

A spokesperson for the RSH says: “This case reinforces the importance of meeting debt obligations. It also shows the importance of landlords having robust risk management arrangements and control over the social housing they provide. 

“It highlights the need to follow our full registration process, rather than acquiring an existing provider, so we can identify potential issues with a landlord’s business arrangements at the outset.”

The defaults and the following events are “a realisation of the issues we found in our 2022 investigation” and published in Heylo RP’s non-compliant regulatory judgement, it says.

“We found that the arrangements Heylo RP entered into, including the leasing of its homes from investment pods, left it with limited ability to assess, manage and address risks to its social homes. We also found it had limited control over the protection of its social homes should risks crystallise.

“Since we published our judgement, Heylo RP has been unable to make the required changes to demonstrate the delivery of the outcomes of our standards.

“We have placed Heylo RP on our gradings under review list, as we carry out further investigations because of the recent developments.”

Can the regulator safeguard Heylo’s homes?

The Heylo case demonstrates a gap in the regulator’s powers. Simply put, it wasn’t able to do anything to stop the pods entering administration.

Were an insolvency to happen through investor-enforced security within a registered provider, the regulator can use moratorium powers, which give it 28 days to come up with proposals that creditors will agree with. It can also ask the housing secretary to appoint a special administrator with responsibility to keep the homes in the social housing sector.

But in this situation, due to Heylo’s unique structure, there are no guarantees.

“The future of the social homes is extremely important and we want them to stay in the regulated sector,” the regulator says. “The pods own the social homes but are not regulated by us, so the event has not triggered our insolvency powers and we do not have a formal role in the administration. We are however working closely with the administrator as it carries out the sales process.”

Heylo says all the terms of shared owners’ leases with its registered provider will stay the same in the short term. PwC adds that “there is expected to be no impact on the shared owners as a result of the administrations”.

Interestingly, the regulator used to have more power in this area. Before 2017, it had greater say over the constitutions of registered providers and social housing assets, meaning it might have been able to block some of Heylo’s transactions.

These powers were removed under a deregulation package by the previous government, with the goal of keeping the social housing sector off the public balance sheet. The Heylo administrations could reignite this debate, especially as the regulator is currently redrafting its economic standards.

What happens now

Much of the administration process will play out on Companies House. By the end of April, the administrator’s proposals for the four affected subsidiaries will be filed. These will be followed by various progress reports examining what the companies owned and eventually a final report.

Running alongside this will be the sales process for the affected homes. This has not yet started, but information-gathering is underway, Inside Housing Living understands. Given the number of homes involved, selling them all is likely to take time.

It is too early to tell who the homes will be sold to, although it is understood there is interest from other owners of social housing. The homes could be taken out of the affordable housing sector, although it is worth remembering that this did not happen to Assettrust’s homes. The fact that the homes have shared owners living in them will be factored into any sale.

In a statement on its website, PwC says the administrators are “engaging closely with key stakeholders, including the Regulator of Social Housing, to ensure continued stability across the portfolios”.

Then there is the question of contagion risk. Could the financial troubles of the affected pods spread to other Heylo subsidiaries and its other, currently unaffected, homes? Heylo insists the other pods are unaffected, while its registered provider remains non-compliant with the regulator but is not in default or administration.

It seems as if each subsidiary has separate assets and liabilities and there are not significant balances between them, although the administrators’ report will provide a definitive answer.

Heylo’s registered provider has also undertaken various personnel changes, to give the registered provider greater independence, with fewer people sitting on multiple boards across the group’s companies. Among them is David Montague, who chairs Heylo RP and has stepped down from Heylo Group, while Andrew Geczy, chief executive of Heylo Group, has stepped down from Heylo RP.

Even if the subsidiaries are distinct, there is a risk that noteholders of the other pods get spooked. 

One of the other pods is backed by a listed public bond, Heylo Housing Secured Bond. Although the bond is separate to the affected pods, its price took a big hit the day the administrations were announced and at the time of writing was trading 22.6% lower than before the defaults. However, we cannot be sure what caused the dip in price.

“The team at Heylo Housing is working closely with the administrators, and our customers remain our top priority to ensure a smooth and orderly transition,” Heylo said in its original statement last month. “As this is an ongoing matter, we are unable to comment further at this stage.”