As the new housing minister seeks to deliver 1.5 million new homes, Our Managing Director Gemma Bourne urges the department to draw on an existing funding solution that could help public money go further.
We fully support Matthew Pennycook in getting Britain building again to deliver 1.5 million new homes within a first term.
In the past, we have seen new governments using their first months to generate new projects from scratch to deliver targets like these, naturally eager to put their stamp on shaping change.
However, I urge decision makers not to forget the work that has already been done by housing associations, real estate experts, housing investors and their colleagues in Labour to identify solutions in the inquiry into Social Housing published in May, which was conducted by the cross-party Levelling Up, Housing and Communities (LUHC) Committee and chaired by Clive Betts MP.
Importantly, the inquiry advised that a new Government should commit to building 90,000 new social rent homes every year; a call backed by many in Labour including Clive Betts, Ian Byrne, Nadia Whittome, and Mohammad Yasin.
It also makes prominent references to an effective method to fund this mission: social impact investment. Through bringing in private money from socially motivated investors, social impact investment amplifies the impact of every public pound spent, enabling the Government to spend ‘smarter' to tackle some of the UK’s biggest social challenges.
The Ministry for Housing, Communities and Local Government has already drawn on this resource to help extend its reach. For example, in 2021 and 2022 it invested £25 million into four homelessness property funds, which helped increase its impact by attracting an additional £138m of investment from pension funds and others. This money will be recycled and re-invested over time; a smarter alternative to the £1.8bn of one-off payments that Local Authorities spent on Temporary Accommodation in 2023.
Local Authorities are struggling to afford skyrocketing temporary accommodation costs, which have increased 62% in five years with 1 in 200 households now living in emergency accommodation (1). Devastatingly, 75% of tenants living this way report poor conditions (2).
In contrast, 96% of tenants in impact investment homes report that the property is in good condition. This enhanced quality and care not only improves lives but saves the government money – with recent research from Alma Economics showing that just five of these funds have in ten years saved taxpayers £140m and have supported 3,300 people, including 1,600 children.
Social impact investment often provides or enables wraparound services for people who are unable to access the mainstream housing market because they are experiencing poverty, fleeing domestic abuse or living with a disability. People like Fatima, who was able to flee domestic abuse and restart her job as an NHS nurse thanks to finding a safe home.
This is not a new solution; it was partly conceived during Gordon Brown’s premiership and has now existed for over ten years. And in recent weeks we have witnessed growing momentum of support from former and current Labour ministers - including from Former Prime Minister Gordon Brown (writing in the Guardian) and Department for Work and Pensions Minister Sir Stephen Timms (writing in CityAM).
Better Society Capital projects that a £100m government grant could, over the next decade, attract an additional £650m from investors. This would provide housing for 23,750 people and generate £1.1bn in public spending savings.
There is now a 10-year track record for a solution to funding more and better quality social and affordable homes. It is time to scale it.