Investors who care: How private investment in temporary and emergency housing boosts social impact and economic returns

Kathryn Giblin, Chief Strategy Officer at specialist accommodation services provider Stef & Philips, explains that private investment in temporary and emergency accommodation isn’t just a lifeline for those in need, it’s also a sensible economic move. 

The UK is facing a housing crisis, with a 12.1% increase of  homeless households living in temporary accommodation recorded by the Government in 2023.  While  the National Housing Federation’s Spending Review submission states that resolving the housing crisis would require £12.8 billion a year in real terms, for ten years.

Fulfilling this need is a herculean task and one that cannot be achieved through public funding alone. Good news then than the UK is also seeing an increase in so-called ‘ethical investment’. As individual investors and funds look to support initiatives that address urgent social issues, as well as delivering secure returns, these public-private partnerships can play a critical role in meeting the country’s housing needs.

Riding the wave of conscious capitalism, social impact investment in the UK has increased 11-fold from £830m in 2011 to £9.4bn in 2022, according to Better Society Capital’s market data report. During this period more than 5,000 organisations have utilised the capital raised from private social impact investments to provide essential services and support to communities nationwide. Despite rising interest rates, a growing cost-of-living crisis with 14.3 million people living in relative poverty, and instability in broader financial markets – which saw declines in private and alternative investments – investments targeting social issues continued to grow last year.

The National Housing Federation’s Spending Review submission states that resolving the housing crisis would require £12.8 billion a year in real terms, for ten years.

Currently, central and local governments fall short of meeting this financial commitment, presenting an opportunity for public-private partnerships, where private investors infuse new capital and resources needed to bolster public finances. These collaborations can help fund large-scale projects to improve healthcare and resolve inadequate housing conditions.

The need for quality housing

Well-managed, good-quality temporary and emergency housing is crucial as a transitional step from on-the-rise homelessness to securing stable, permanent housing. It’s essential for beginning the process of rebuilding lives.

Conversely, when individuals are forced to live in accommodation that is not fit for purpose, it exacerbates their already challenging circumstances. Out of all the households in the UK that currently have a homelessness duty from their local authority, 26.2% of them have a history of mental health challenges. Poor living environments can lead to a negative impact on the mental and physical health of individuals, increasing the burden on the NHS. It could also cause more social disorder and unemployment, which adds strain to police, courts, prisons, ambulance, and social services. 

A recent housing sector survey from RESAM and Social Housing revealed housing providers acknowledged resident wellbeing as one of the two most pressing issues facing the social housing market, showing the critical need for good quality social housing.

Ethical investment growth drivers

Three core fundamentals are catalysing the growth of investment into social and affordable housing by eliminating the uncertainties often associated with other investment forms:

  • A diverse investment portfolio that provides steady and resilient returns

Investing in social and affordable housing offers a dual advantage to investors: diversifying their investment portfolios and providing a buffer against broader market fluctuations. This strategy leverages the consistent demand for affordable housing, which tends to stay stable even during economic downturns, thereby safeguarding investments from market volatility.

In addition to attractive financial returns, investing in social and affordable housing presents a unique chance to positively influence society by addressing the urgent need for housing among underprivileged groups. By supporting these housing initiatives, investors can contribute to community well-being and enjoy the benefits of a diversified investment approach.

  • A robust long-term demand

The social housing sector offers a promising investment opportunity thanks to the steady and prolonged demand for this type of housing. A significant benefit of investing in social housing is the reliable revenue it generates.

This income stability can offer investors predictable cash flow and economic security that they might not find in other investment avenues.

  • Resilience against macroeconomic forces

Investing in social housing protects investors against macroeconomic challenges such as economic growth, inflation rates and global events such as the pandemic. Unlike other investment options, the sector’s distinct nature provides a shield against economic instability. Consequently, properties in the social housing market tend to experience lower impact from market swings, preserving their long-term value.

How to find the right fit

At Stef & Philips, we have seen first-hand the increase in private investment in social and affordable housing over the past five years. Our portfolio includes £700m in property assets under management comprising 4,000 units incorporating individual homes, flats, HMOs, and larger sites and we work with over 200 investors and more than 60 trusted local authorities and housing partners.

As one of the UK’s largest specialist providers of temporary and emergency accommodation and services, we understand the importance of partnering with a trusted service provider when deciding to invest in social housing. When choosing a partner, investors should look for social housing providers who are transparent about their services, clear on how they aim to achieve their objectives, and who put their service users first. Choosing well is crucial to maximising stable financial returns.

Better lives, better returns

Investing in social housing offers a viable solution to the UK’s housing crisis while bringing in additional resources that enhance public funding. Equally, investors gain the dual benefit of securing steady returns while actively contributing to the welfare of some of the nation’s most vulnerable people.

Ultimately, social impact investing in the housing sector can profoundly influence societal well-being and create a more equitable economic system.

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