Homelessness in the UK made the headlines again last week, with the latest figures worrying reading. Over 56,000 households were living in temporary accommodation between April and June this year. There are now more than 2,000 families living in B&Bs, a ten-year high. And a third of these had been living there for more than six weeks.
At its heart, it’s a basic supply and demand problem: there simply aren’t enough houses to meet demand. Last year, nearly 100,000 new builds were begun, compared to around 230,000 new households formed. Based on government projections on household changes and current housebuilding rates, this means a shortfall of 750,000 households by 2025.
So what is the role for philanthropists here? In the past, industrialists like the Rowntrees, Levers and Cadburys set aside huge sums to build affordable housing for their workers. But this responsibility gradually shifted to the state, and modern-day philanthropists appear to be unwilling to step back into the fray. Why? Partly because of a shared reluctance to stand in for the state, but also, as the figures above hint, because the sheer scale of the problem is intimidating.
George Peabody, an American banker and philanthropist, donated the modern-day equivalent of £30 million to build 20,000 London homes (pictured above). Even for the few with this sort of money today, land and construction costs mean that building Peabody-esque swathes of houses is not feasible, and the difficulty in making a tangible difference is proving discouraging to potential donors. How else can we approach such a pressing issue, then, if traditional, grants-based philanthropy alone won’t cut it?
A roof over your head
It seems like social investment might be appropriate here. Providing affordable housing is likely to be on the lower end of the risk spectrum, as it tends to be secured lending. Depending on when the asset is disposed of, it offers the possibility of modest returns on capital — although it’s important to remember that it’s likely to be a long-term investment. Also, since property is an illiquid asset and selling it incurs costs, investors may prefer to roll over the investment.
Most importantly, providing affordable housing has the potential for significant social impact, particularly if targeted at specific disadvantaged groups for whom stable, affordable housing is a catalyst for further improvements (for example, victims of miscarriages of justice, or mothers leaving prison). Social investment can also add value by testing innovative approaches, providing the evidence base for wider roll-out by other providers.
We are now seeing a number of interesting innovations in this field, with more options being developed for retail investors: for example, homelessness charity Framework and Nottingham Building Society recently launched a new social investment model that uses a retail charity bond to offset the interest rates of a commercial loan. Framework is using the loan to build move-on housing for homeless people coming out of emergency accommodation. Earlier this year, Golden Lane Housing (GLH) and Triodos Bank issued an unsecured, five-year bond paying 4 per cent, which was fully subscribed. GLH is using it to acquire and adapt properties for people with learning disabilities.
Of course, scale will still be a problem, and, as with all social investment, it’s still early days. But it’s exciting to see new ideas for tackling big, difficult social issues. Over the course of the 20th century, philanthropy and social housing drifted apart. But as confirmed by a new report by The Smith Institute and NPC, now might be the time for them to find new ways of working together again.
Disclaimer: The social investment schemes mentioned in this article are not recommended by the author or by NPC.
Eleanor Bentley, New Philanthropy Capital