Richard Williams for Investment Week, 21 July 2022:
As the wider economic challenges grow, providing insulation from the worst of the downturn has become a priority. The social housing sector has all of the characteristics to provide this protection, while also delivering substantial social impact.
Despite the fundamental asset being residential property, it has very little correlation with the housing market due to its use and the unique income model.
The need for this type of supported housing is only growing. The Personal Social Services Research unit has predicted 30% growth in the demand for specialist supported housing in England by 2030 and 55% in respect of learning disability alone. Meanwhile, the National Audit Office has forecast a 29% increase in adults aged 18 to 64 requiring care by 2038, compared to 2018.
Meanwhile, the cost-of-living crisis is only going to exacerbate the homelessness crisis in the UK. Since the start of the Covid-19 pandemic a total of 222,360 households have been tipped into homelessness – equivalent to the population of the city of Liverpool, according to government figures. While homelessness charity Crisis estimates that the number of homeless people in England will increase by a third before 2024.
A change in the law in 2018 placed a legal obligation on local authorities to house homeless people, or those at risk of becoming homeless. A severe shortage in supply of fit-for-purpose homeless accommodation has meant local authorities have been forced to house people in expensive temporary housing such as B&Bs and guesthouses, which in some cases are 70% more expensive than what Home REIT, the £904m homeless accommodation fund, provides.
Substantial savings are also available to local authorities if they can rehome a person in need of specialist supported living (for example, people with learning disabilities, autism, mental health issues or physical disabilities) from a hospital into a property adapted to their needs.
Housing benefit paid by local authorities to care providers, housing associations or charities typically provides 100% of the funding of rent for social housing, making the income effectively 100% government backed.
This income is also typically linked to inflation. Civitas Social Housing’s (the largest investor in specialised supported housing) leases, for example, have an annual rental uplift, the majority linked to the Consumer Prices Index and a smaller proportion by CPI plus 1%, while Home REIT’s inflation-linked income is capped at 4% per annum.
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