In 2017, we announced housing would be a core focus area for developing new investments in the next phase of our strategy. Our belief that housing is an area where social impact investment can make a substantial difference was informed by the pressing social problem, along with our experience of making investments in housing which have already raised £500 million from us and other investors.
Our focus
Our approach is to start with the social issue and collaborate and design solutions with the partners who understand and are committed to tackling those issues. Housing isn’t just one issue, but a complex system affecting many different people in different ways.
To get started, we decided to focus our efforts on co-developing new investments in homelessness; improving the private rented sector; and domestic violence. We will shortly be appointing a fund manager for a new housing fund for vulnerable women, which is based on research that showed that many women’s sector organisations lack suitable and affordable housing, which can limit their ability to deliver vital services.
We’ve also recently announced an investment into the SASC Housing Fund. SASC developed this fund in partnership with high impact charities, so they could provide homes to vulnerable people and their families.
We also want to try to shift the wider system that affects housing outcomes, for example influencing how institutional investors are allocating their capital, by incorporating impact intentions and considerations into decision making. Our investment in CBRE’s Affordable Housing Fund, announced in January is an example of this systemic approach to investment. The fund provides equity-like funding for housing associations to build affordable and social homes and helps address an acute shortage of new supply.
We chose to invest in this particular fund because of CBRE’s reach to investors who are new to impact investment, their willingness to innovate in the design of the product to better meet the needs of the users, and their commitment to embedding impact management in collaboration with the Good Economy Partnership and Big Society Capital. This is an opportunity for us to partner with a leading real estate investment manager to develop an impact framework that can be applied to their investment process. We see this as a first step to demonstrate the value of this approach that can be applied to broader investor and fund manager community.
Challenges and emerging solutions:
Unfortunately, we are collectively a long way from solving the housing crisis. For example, Crisis estimates that 90,000 new social homes are needed each year and there are many challenges to overcome. We can’t tackle them all, so for 2019 we will continue to focus on how we can:
- Support high impact business models to emerge and scale, particularly those that support vulnerable people or that offer alternative, more socially motivated approaches to new development. We will do this by working with charities, fund managers and other expert partners to test and develop innovative housing solutions. It takes a long time to understand complex problems, create something new and build trusted partnerships - but it's worth the patience to get it right.
- Bringing in more capital and managers that are mutually aligned and motivated by social impact. We will do this by supporting proven impact managers to scale through co-investment and other support, and investing into funds by more established commercial managers that demonstrate innovative approaches to the housing crisis and a commitment to embedding and enhancing impact management practices. We may also seed new funds, warehouse new asset portfolios and structure aggregator vehicles.
- Enhancing and developing standards of impact management across the sector, particularly at the intersection between commercial impact investors and housing providers. We will do this by develop a housing impact framework for BSC to apply to all origination, investment decision making and portfolio management that ensures the consistent collection of priority metrics and uses impact evidence to build a narrative about what social impact investment can achieve. In doing so we hope to help to drive greater consistency in the market and open up new investment opportunities for BSC
How will we know if our approach is working?
We know it will take a long time to change the UK’s housing system and that we will only be a small part of the wider movement. It is also essential for us all to gather evidence that tells us how our investments in housing are affecting people’s lives.
Our vision is for mission-led capital into housing to grow – but we believe that it must contribute through more than scale alone. It must help improve people’s lives by starting with the social issue, by encouraging social innovation, by being more aligned to partners’ missions and by being more accountable in assessing the social impact of our investment choices.
If you’re an investor or fund manager and would like to explore how we can work together, please get in touch.