“The UK is in the midst of a housing crisis.”
Yes, we’re tired of hearing this statement too. Yet there is a clear gap in the current response to the crisis, and we believe social impact investment can help close this.
Current focus is misdirected
We know that the crisis is deepening and that the effects are widespread: it is not just those on the lowest incomes being impacted, it is low and average-income households, and increasingly, families. An ever-growing number of families are living in the private rented sector as access to social housing becomes restricted to only those in the direst of economic circumstances. It seems clear that given the wide-reaching effects of the crisis, the current emphasis on solutions that focus solely or predominantly on increasing the supply of homes for ownership, is insufficient.
Solutions lie in the private rented sector (PRS)
The failings of the private rented sector are widely documented: unaffordable, poor quality, insecurity of tenure, to name only a few. The termination of assured shorthold tenancies remains the single biggest cause of homelessness in the UK. There is, therefore, an urgent need to address the undersupply of high quality, affordable private rented sector (PRS) housing for those on low to average incomes who cannot afford to own their own homes. An essential part of solving the housing crisis is tackling the problems experienced by tenants and improving the quality and range of choice of housing options available to people living in the PRS.
This is why Big Society Capital has chosen to invest £15 million in the BMO UK Housing Fund, which is working with housing association, Home Group, to trial the innovative Flexible Rent model. The Fund has the potential to contribute to improving the private rented sector through the delivery of new, professionally managed, affordable rental homes, expanding the current build to rent offering to a wider market.
Why social impact investment?
Social impact investment seeks to connect capital with social sector organisations achieving impact. The BMO Fund brings together a unique partnership between BMO Real Estate Partners and Home Group, a housing association with a strong social mission and demonstrated track record of delivering affordable homes, and tests an innovative and impactful housing rental model.
Impact investment, more generally, is flowing into the affordable housing sector in the UK at a growing pace and scale. It’s time that more of this capital be intentionally directed towards improving a part of the housing market that is increasingly becoming the option of last (and only) resort for many people, and which we know leads to some of the poorest social outcomes.
Improvements to impact measurement are vital
But for impact investment to be effective at tackling the problems in the PRS, the way we measure and report on impact across the real estate investment sector also needs to improve. Tracking both successes and failures over time and identifying and reporting on tangible measures of tenant satisfaction, while committing to making the results publicly available, is essential.
We hope that the BMO UK Housing Fund’s commitment to integrating impact at each stage of the development process inspires others across the real estate investment sector to push the boundaries of what is achievable from an impact standpoint. This should result in more investments which contribute to solutions, not only to the housing crisis, but which also lead to wider positive environmental, economic and social change.