Big Society Capital and UK government invest £20m to provide homes for families in temporary accommodation
Second part of government pilot would provide 215 homes and aims to catalyse investment as social housing becomes increasingly attractive for investors looking for assets less exposed to market volatility.
The UK government and Big Society Capital yesterday announced a £20m investment to provide safe and affordable homes to families at risk of homelessness in England.
The funding is intended to catalyse further investment, taking advantage of growing interest in social housing from institutional investors.
The Department for Levelling Up, Housing and Communities is providing a £10m grant, matched by a £10m investment from Big Society Capital, to Resonance’s National Homelessness Property Fund 2, which will use the money to deliver 215 homes for people facing homelessness, with a particular focus on families in temporary accommodation.
Minister for housing and homelessness Felicity Buchan (pictured) said that ending rough sleeping and homelessness was one of the government’s “major priorities”.
“Temporary accommodation is a last resort and while it ensures no family is left without a roof over their heads, we want families to be in secure, longer term accommodation as quickly as possible.”
Interest in social and affordable housing is “gaining momentum” among institutional investors, who are attracted by an asset class whose revenues are backed by the government in the form of housing benefits and not subject to a volatile housing market, Drew Ritchie, investment director at Big Society Capital, told Pioneers Post.
The investment will be deployed across England with a particular focus on London, Greater Manchester and Merseyside.
We want families to be in secure, longer term accommodation as quickly as possible
National Homelessness Property Fund 2, which was launched by social investor Resonance in 2020, buys and refurbishes existing housing to rent at affordable levels to people facing homelessness, while providing them with tailored support to help them turn their lives around.
This is the second tranche of a government pilot to fund homes for rough sleepers through social investment. In June 2021, a first partnership saw the then Ministry for Housing, Communities and Local Government make a £15m grant, matched with a £15m Big Society Capital investment, to a group of funds tackling homelessness across England.
These funds have since raised £112m – including £26m from local authorities and £86.5m from non-public sources such as pension funds, trusts and foundations – which enabled them to provide nearly 300 homes to people facing homelessness so far, surpassing an initial target of 240 homes by 2024.
Likewise, the investment in National Homelessness Property Fund 2 is intended to mobilise capital from institutional investors, Ritchie said. The fund, which has reached £60m thanks to the latest investment, targets a £300m size.
Ritchie argued that it was possible that the current economic crisis could make social and affordable housing more attractive to institutional investors – like pension funds – which were keen to diversify their real assets with something that “actually provides attractive risk-adjusted returns and real world impact, but that’s also weakly correlated with other property markets” as rents are paid through government-backed housing benefits.
“Particularly when you're going into downturns,” he said, “you're going into times when you're expecting to see commercial and retail property do badly. Social and affordable housing is underpinned by government revenue, so it gives a more steady ultimate revenue stream that helps meet investors’ requirements [in terms of risk appetite].”
Social and affordable housing is underpinned by government revenue, so it gives a more steady ultimate revenue stream
National Homeless Property Fund 2 is expected to deliver between 5.5% and 6% returns to investors. “The revenues coming through housing benefit are very secure,” said Ritchie, an advantage when investors were concerned about volatile, speculative markets.
The focus on ESG (environmental, social and governance) investments will also play a part in the growth of the social and affordable housing market – which is now worth £4bn in the UK and is expected to continue growing, according to Ritchie.
In June 2022, there were nearly 100,000 people living in temporary accommodation in England, including 120 children, according to government figures.
“It's a kind of hidden homeless problem that exists and is quite acute in this country,” Drew Ritchie said. “This [investment] is an extension of the government-backed social investment approach to help to tackle that specific challenge [of families in temporary accommodation].”
It's a kind of hidden homeless problem that exists and is quite acute in this country
The government pilot, planned to run until 2024 after which an assessment of its impact will be undertaken by Manchester Metropolitan University, did not initially plan for a second tranche of funding, but saw an opportunity to expand the pilot to target families in temporary accommodation, Ritchie said. There is no further investment planned as part of the pilot for now, he added.
He said he was “pleased to see the government’s continued support” for investment in social and affordable housing as a way to tackle homelessness.
Top image: Thanks to one of Resonance's housing funds, Paul has turned his life around through having a secure and stable home. Film by David Pardoe for Pioneers Post. Picture of Felicity Buchan: David Woolfall for UK Parliament.
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