Written evidence submitted by Better Society Capital (TH0013)

 

About Better Society Capital

 

In April 2000, HM Treasury launched a Social Investment Task Force (SITF) born out of its desire to radically improve the UK’s capacity to create wealth, economic growth, and employment in the most deprived communities. The Task Force was headed by Sir Ronald Cohen to explore how investment can achieve social as well as financial returns, including new sources of private and institutional capital and how to create innovative partnerships between Government, business, and the voluntary sector. The Task Force ran for ten years with their recommendations laying the foundations for Better Society Capital.

Better Society Capital was set up by the Government in 2012 as an independent investment organisation with c.£625 million capital to help grow the social impact investment market in the UK. We have created and continue to grow a sustainable market for social impact investment, so that more and more social purpose organisations, social enterprises, and charities can access repayable finance at a much larger scale and increase their impact for public benefit. To date, this visionary investment has paid off and we have catalysed a twelve-fold growth since 2012 in the amount of money invested in creating positive social impact. Today approximately £10 billion is invested into over 7,000 social purpose organisations, social enterprises, and charities in the UK.

We want to share our learnings and experience of investing into Homelessness Property Funds and from co-investing alongside MHCLG as part of the Social Investment Pilot, which aims to provide new homes for rough sleepers and to share our views on the value for money which has been generated by this programme.

Submission

The UK has a homelessness problem. In England alone, one in 200 households are living in emergency temporary accommodation (TA). Not only is the quality of TA widely reported to be incredibly poor, often without basic facilities and of poor condition - it is also costing Local Authorities enormous amounts of money at £2.29bn annually, a figure that has doubled in the last decade. However, there is an alternative tool in the toolkit. This alternative has a 10-year track record of delivering better outcomes for individuals experiencing or at risk of homelessness, and of savings for local authorities and the taxpayer.

Homelessness Property Funds:

Independent research by Alma Economics has explored how the £260mn deployed by social impact investors to date across five homelessness property funds, managed by social property fund manager Resonance Ltd, has enabled more than 1,000 properties to be acquired. These funds have now housed 3,367 people, including 1,607 children, saving central and local government £140mn.[1] The savings are from reduced temporary accommodation costs (£104mn) and public services savings (£36mn) such as reduced costs in mental health and criminal justice services. The savings are expected to grow to £312mn over the funds’ lifetime (2013-2035).

Homelessness property funds work by attracting investment from institutional investors, such as pension funds, to buy and refurbish properties to a high standard and lease them to homelessness charities and housing associations. These housing partners rent out the properties to homeless households at Local Housing Allowance rent levels and also provide wraparound support services where needed. Thanks to the high-quality accommodation tenants see a significant boost to their wellbeing when compared to those living in temporary accommodation, this equates to a wellbeing benefits equivalent of £17,500 per person. For every £1 of public and private investment into Resonance’s current fund, the National Homelessness Property Fund 2, £2.3 in financial and social value will be created over the next 10 years.

Better Society Capital (BSC) is the leading investor in homelessness property funds. We have committed £120mn, alongside £242mn from other investors. During the last 10 years we have built a unique and deep expertise on how to do this properly. In practice this means working with specialist partners who understand the complexities around why individuals are at risk of homelessness and the systems around them. In the absence of this, private investors can create worse outcomes for people as seen in some recent high-profile cases.

Social Investment Pilot

In 2021 and 2022 the Ministry of Housing, Communities and Local Government (MHCLG) reallocated £25.75mn from its existing housing budget to homelessness property funds in the form of a recyclable grant. BSC matched this with investment capital of £25mn, leveraging in £138mn of private investment, a 5x match on MHCLG’s grant. This investment was into a collection of funds managed by Social and Sustainable Capital, Resonance and Bridges Fund Management. This is a first of a kind partnership between central Government and Better Society Capital which we believe provides an excellent example of a departmental programme which has successfully worked with social impact investment to provide not only value for money but also better outcomes for homeless people.

Compared to the traditional one-off payments under the current temporary accommodation model, or compared to traditional government grant making, MHCLG’s grant will be recycled and used multiple times. This allows MHCLG’s money to continue generating good outcomes for longer. A proportion of this grant has also been used to undertake a third-party evaluation by Manchester Metropolitan University which is underway and is already showing positive results.

This social investment pilot has already exceeded the initial 415 homes target and funded 760 units to-date and is forecasted to deliver over 800 homes by the end of 2024. Of the homes funded to-date, 58% are in areas in England with the highest rates of homelessness.

We believe that this pilot should be seen as a key part of MHCLG’s toolbox in order to tackle homelessness. If MHCLG were to scale this solution further, for example, with an additional repayable grant of £100m, with BSC providing some match capital we would be able to leverage in a further £550mn of private investment. Based on the research undertaken by Alma Economics, this would unlock £1.1bn in public savings and move 24,000 people to stable, safe, and quality homes from the expensive, poor-quality TA. The solution can also be tailored to support different client groups depending on need, or a given focus area. This solution has the ability to scale-up at pace meaning the money provided by MHCLG could be put to work quickly allowing the housing of thousands of people within the first 12 months of investment.

Our Head of Social and Affordable Housing, Gemma Bourne, was an expert witness for the MHCLG Select Committee Enquiry on the Finances and Sustainability of the Social Housing Sector in 2023 and we would be delighted to share more information on this proposal.

November 2024

 


[1] Financial & social impact of Homelessness Property Funds, Alma Economics, 2024