Community-Led Housing Facility | Big Society Capital

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Community-Led Housing Facility

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Facility to increase available development capital for larger community-led housing projects.

Social impact 

There is a significant affordable housing need in the UK. One model that is helping alleviate this need is community-led housing. Communities are coming together to design and build affordable homes for those local households most in need. BSC’s facility aims to support these community-led organisations achieve their intended social impact at both the household and community levels.

Projects that benefit from the facility will have a strong emphasis on providing affordable housing. They will also reflect the communities’ preferences on the allocation of affordable homes, with many supporting local households to stay in their community that would otherwise be priced out of the area by market rates.

Social impact at the community level is achieved by increasing confidence and capacity through engagement with the design and delivery of the project. It is hoped that the community will then be equipped to tackle future issues that arise. Furthermore, projects in urban areas, which the facility will mainly target, can achieve regeneration in the local area through both the new assets and increased civic pride. The underlying assets will remain in long-term community ownership and the community will benefit from any surplus income generated.

Financial rationale 

The facility will provide development finance to larger, mainly urban projects at the post-planning development stage where there is an emerging need for significant capital. It is expected that projects will require a mix of funding that includes both senior and subordinated development finance, as well as an element of subsidy, such as gifted land, and/ or grant funding. The facility will focus on meeting the need for subordinated finance as this is where there is likely to be insufficient capital available to meet projects’ needs and where there is a risk of a market gap developing.

The facility is currently available to FSE Group, Northstar Ventures, and Social and Sustainable Capital. These participating intermediaries can call on the facility to co-invest alongside them into eligible projects where they are unable to fully meet a project’s financing requirement due to their maximum loan size. The intermediary will fully manage the investment from initiation to exit.

The community-led housing projects will repay the development finance from either the sale of homes or refinancing with long-term debt that will be serviced by the rental elements of the scheme.

Market development

The community-led housing model is growing in prominence as more communities are taking action to address local affordable housing need. The barriers often cited by these communities are the availability of support and securing appropriate financing. A number of enabling organisations have emerged to provide guidance and capacity building in response to the former barrier, and alongside other interested funders, the facility aims to help address the second barrier.

As larger projects approach the development stage, there will be a requirement for significant capital. Based on the current and emerging landscape, BSC believes there may be insufficient finance to meet this need and that it is unlikely to become available without intervention. In response, BSC has designed a £15 million facility that has the potential to leverage a further £60 million into community-led housing projects.

In the short run, the facility aims to catalyse more projects towards completion by giving them the confidence to pursue projects with sight to significant capital. Over the medium term, it is hoped a robust track record of completed projects will be built so that future investors can see both the social impact and financial rationale for supporting more community-led housing projects.    

Investment details

Last updated | 
9 December 2016