What's social about property? | Big Society Capital

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What's social about property?

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Big Society Capital has recently made two new investments into housing projects to address the growing need for homes that people can afford:

  • National Homelessness Property Fund: We have invested £15 million into a national roll-out of the Real Lettings model, which has been pioneered by Resonance and St Mungo’s in London. With the Real Lettings Fund in London having raised and invested close to £60m, there is an opportunity to replicate in up to 6 regions in England – with Local Authorities as key partners and investors.
  • Funding Affordable Homes: We have invested a further £15 million in the launch of Funding Affordable Homes. So far the fund has raised £50 million to build and buy sub-market rent housing in areas of high need. It will work in close partnership with housing associations and charities who are constrained in their ability to access finance, allowing them to increase the number of houses they can provide to families on low-income and other vulnerable people.

These two investments seek to unblock different problems in our housing system. The National Homelessness Property Fund will assist people who need help in that transitional period from homelessness to a more permanent housing solution. Funding Affordable Homes will unlock additional housing on a longer-term basis, to help address the chronic shortage of housing that people are facing.

Why have we continued to invest in housing and property?

Not only is adequate housing a basic right, but poor housing can have knock-on effects on many other aspects of people’s lives – such as health, employment and education. Yet we face rising homelessness, over 100,000 children in temporary accommodation and too many households struggling to find a suitable and affordable home.

Without a secure place to call home, it is difficult to stabilise other aspects of people’s lives.  There are charities and housing associations around the country who are confronted by the urgent need for homes for the people they support. These may be families on low incomes or vulnerable people such as young people leaving care or people escaping domestic abuse. And people with learning disabilities may require more specialist housing and support, but still want to live independently within their communities.  

What difference can social investment really make?

Housing associations have been very successful at raising finance from banks and the capital markets – which perhaps raises the question of what difference social investment can really make in housing.  

The most important answer is that many charities and housing organisations cannot access enough accommodation for people on reasonable terms, if at all. So they need additional sources of investment to allow them to buy or build this housing themselves - or a partner who can meet this need for them. You can see that in the way that Broadway developed the Real Lettings Fund with Resonance and Thera’s partnership with Cheyne to buy houses for people with learning disabilities.

This gives charities and social enterprises greater choice – some will prefer to take a loan from a social lender while others may wish or need to share the risk with an investment fund.

Attracting new investors

The housing market is also changing and we are seeing disruption of traditional approaches to development. Housing associations cannot borrow indefinitely, especially mid-sized and local organisations that do not have large commercial operations. We think there is a role for social investment to test new ways of financing housing that is affordable to people on low incomes. This could catalyse significant investment from the investors that have the scale of capital needed to tackle this problem – such as pension funds and family offices. The rationale for our investment into Funding Affordable Homes is to prove a model where additional equity is provided to housing organisations without them stretching their debt covenants.

All of the four social property funds in our portfolio have successfully attracted high match ratios already – with aspirations to substantially increase this.  BSC’s investment of £60 million in property funds has thus far unlocked around £160 million more capital from a range of investors  – many of whom are entering the social investment market for the first time. Ultimately we hope that our initial investment will mean more investors will get comfortable investing equity in housing that people can afford.

Impact must drive decisions

If we are to attract in large amounts of institutional capital to tackle social problems, we want impact screening and measurement to be embedded from the outset. We expect fund managers to raise the bar on impact measurement so this becomes better understood and valued by their investors. By that, we mean that the funds are building an understanding of who they are helping, and of what works for both the charities and their beneficiaries – leading to better investment decisions now and in the future.

This is demonstrated by Cheyne’s Social Property Impact Fund. Before the fund launched, they worked with New Philanthropy Capital to develop their impact screening, assessment and measurement approach. NPC now acts as the Impact Partner for the fund, and as a member of the Investment Committee. This is the first time Cheyne has accepted an external IC member across their $6 billion funds.

What are we looking for in the future?

We expect to make more investments into housing and property in the coming year.  And we believe we can have the greatest impact if we prioritise homes for people worst affected by the UK’s current housing problems and work with the charities who support people in crisis or who need help to live independently.

We are working on a range of ideas that encompass housing for people with learning disabilities and scaling up community-led housing in urban settings. We are also following with interest the emergence of alternative models for addressing long term homelessness – for example housing first - and innovative solutions for tackling the temporary accommodation shortage, such as Y:Cube.

The problems facing the housing market are so far-reaching that social investment will only ever be part of the solution but - as a testbed for housing innovations that are guided by the impact on people’s lives and by supporting the charities and social enterprises that are working to deliver this  - we think social investment has an important role to play.

Find out more about our investments in housing. 

Last updated | 
5 February 2016

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