Natalie Elphicke is a non-executive director of a leading building society and a published policy writer on housing and housing finance with Policy Exchange and the Centre for Policy Studies. She is co-founder and Chairman of Million Homes, Million Lives.
The Prime Minister has announced that the UK is to take thousands more refugees. Councils have a core role in ensuring that housing is provided for those in need. George Osborne has suggested that funding from the international aid budget may be applied to assist with housing and other costs. Where are the refugees going to live? How are we going to build thousands more homes? How are they going to be paid for?
For those already concerned about the domestic housing challenge we need to face this additional housing need straight on, with courage, action and positivity. We can build the extra homes, and we can choose to invest and pay for extra homes, in a smart way which maintains taxpayer value, harnesses philanthropic funding and adds homes to the domestic market at the same time.
The refugee housing challenge provides an opportunity to step up and scale up new approaches to finance to build these extra homes we need. In particular, it is a real opportunity for social investment finance. Social investment finance can ensure that taxpayer gets value for money over the long term for this investment in additional homes. As Conservatives, we like to match a compassionate heart with a sound business head. At a time of tight public finances, where local councils are making big decisions on priorities and spending, if we can find a way to deliver new homes as an investment rather than a give-away or a liability this could help to ensure that public support remains robust.
How could a social housing investment fund work? One proposal would be to create a housing social investment fund in which the Government invests aid budget funds as long-term equity or provides a similar guarantee. This could be matched with social philanthropic contributions to make a financial return as well as a social one.
In other words, everyone who wanted to help make a real and practical difference could join in. You could pay into a fund towards building new homes on the basis of an investment return on your money. Social finance allows money to be applied for a really good purpose. In this case, to be harnessed with a modest return to fund the building of homes. The immediate investment from Government could see a long term return for taxpayers. A government-supported investment could be expected to attract three to four times more in scaled up funding from philanthropic supporters, corporate social responsibility and other finance sources. For example, a £1 billion fund from government could enable £4-5 billion to be raised overall.
This could enable a portfolio of say 25,000-35,000 homes to be built. So for every safe home we make for our refugee neighbours, we could build up to another two or more homes to meet current domestic need, across all tenures. In our work at Million Homes we could see a five per cent real return using these approaches instead of traditional grant based programmes.
The social investment fund could be opened to councils to invest land and assets. That way they could also expect a return on their housing services and other support. Tax breaks for pension or ISA investment can be directed to support social investment. This could also kick start the delivery of social finance in our country which can be used to good effect to support other social investment programmes and services.
Has it been done before in the UK? There have been large scale examples of successful philanthropic social finance for housing in our country’s past which have provided mixed community housing. In other words, to build more homes for everyone as well as those in housing need. The Garden Cities programme being an example, whereby responsible investors were encouraged to make an investment in the ideal of the garden cities alongside a financial return if the scheme was successful. At the time the phrase ‘philanthropy at five per cent’ captured this idea of social good and a financial return, with five per cent interest on loans. Perhaps the time for ‘philanthropy at five per cent’ has come again.
Currently, there are smaller scale standout successes. The church based charity Hope into Action uses the financial strength of its members to invest in buying homes for people who need a helping hand in housing and in other ways. It is a worthy winner of a Centre for Social Justice Award for its work. Another fantastic organisation is Habitat for Humanity, which does tremendous work, working with future residents who put contribute ‘sweat equity’ – that means practical help and assistance from their skills and interests – and putting together corporate money, professional builders and others to build extra homes.
Can we build the homes we need? Now, some people might think that we cannot build the new homes needed for thousands of refugees. However, there are some strong signs that we can do so. Our passion to help others in need can drive further housebuilding output.
To put this issue in its housebuilding context, the latest housebuilding figures for private development in August are hugely encouraging. Private housebuilding had plummeted following the impact of the credit crunch and the onset of the great recession. It near halved within a year. However, the number of new homes started in 2014 was within 10 per cent of the long term average run rate. During August, many key indicators including planning permissions, housing starts and net mortgage lending were all at their highest for many years. Housing is now demonstrating strongly positive results which can be accelerated further. We have the land, planning permissions, industry skills, construction techniques and can harness social finance to deliver the extra homes which are needed.
We are a country emerging from challenging times. By using social finance we may not need to choose between public services and helping our neighbour. We may not need to choose between building to meet our domestic need and providing a roof over the head to those who have nothing. Housing is good financial and social asset. The right investment structures can pay for themselves and do the right thing.