We should solve the social housing problem with sustainable housing
This post is by Bruce Davis, founder and joint managing director of Abundance Investment
The current housing crisis is, alongside Brexit, the political hot potato. According to a recent report from Shelter, 1.15 million households were on the waiting list for social housing last year, with only 290,000 homes made available.
Successive governments have promised and failed to stimulate the construction of enough new homes. Crisis says the government would need to build over 100,000 social homes per year for the next 15 years to end homelessness.
As a society we ought to be (and are) deeply concerned. We need to change the way we think about housing while finding alternative ways of financing it.
The current model isn’t delivering
Our 27 million homes in the UK represent £6 trillion of wealth and contribute 40 per cent of UK carbon emissions. For most people aspiring to home ownership their property is the biggest single investment they will make over their lifetime. “My house is my pension” has moved from aspiration to truism. Decades of rising prices have led to the belief that investing in bricks and mortar is a one way bet.
But it’s harder to apply that adage to improving the energy efficiency (or energy generation capacity) of heating, lighting and powering our homes, our own biggest personal contribution to the UK’s carbon emissions. This is because the value of home ownership now is derived mainly from speculation on the future value of the land it is built on. A bet that, in the future, residential land will be more scarce and valuable than it is now. Investing in capital above the ground – whether it’s a new kitchen or solar panels on the roof – is less effective than simply holding onto the capital ‘sunk’ into the ground.
The property development industry knows this only too well, which is why they buy up greenfield sites and hold onto them as long as possible while intrinsic values rise, before building ‘executive’ housing estates. Successive housing ministers (15 in 20 years) have also subscribed to the theory that the housing bubble is caused by a strong demand for housing and a shortage of new housing stock.
In reality, demand is a function of the credit supply from banks and building societies and the value of housing as an investment in its own right. The current model of property development is not delivering the numbers of new homes we need, nor the right sort: homes that are affordable, especially for younger people and families with limited capital.
Greener housing: luxury or sensible investment?
This makes the UK’s housing stock uniquely resistant to generating investment which would improve its sustainability. Greener housing is seen, like organic food, as a luxury purchase rather than a sensible investment which also protects against rising energy bills and carbon levies.
Abundance promotes new models of investment that don’t follow the status quo, which is why we’re now diversifying from green energy into social housing. Government backed rental incomes and 50-year leases via housing associations mean there is a stable, inflation-linked income stream available for investors from the start. Through our new project, Merseyside Assured Homes, we are seeking to address together the shortage of social housing, its sustainability and its funding methodology.
A robust solution
Working with pioneering housing developer Octevo we are backing a radical model to deliver genuinely long term social and affordable homes that are designed to stay that way. It will start with 30 new rental homes to be built in the Liverpool area on three different brownfield sites which already have planning consent. High standards of construction will integrate sustainability and energy efficiency, and the project design also aims to foster a sense of local community.
Once built, various parties including a social registered landlord, Octevo, and future investors, will take over the operations, maintenance, and long term finance of the homes.
This model will provide security of tenure for those most in need, at rents they can afford now and into the future, and an energy efficient place to call home for the long term.
We hope it will be the first in a series of similar projects providing a robust solution to finance and procurement issues, and making a genuine difference to local housing problems, not only in Merseyside, but across the UK.