How to fund a housing revolution
“There will be 60,000 people sleeping in hostels this evening, with another roughly 10,000 in night shelters.”
To end homelessness, we need a revolution in housing. We need to maximise the potential of existing buildings and ultimately provide 90,000 additional social homes per year in England alone. Over 300,000 households are at risk of becoming homeless this year with that number set to rise if we don’t find new and better ways to solve this crisis.
“I’m absolutely certain that we can end homelessness and that we should. It matters to me personally and I want to play my part in shifting the response to homelessness.”
On Thursday 16 February, Venture Studio from Crisis, in partnership with The House of St Barnabas, hosted a debate entitled: ‘How to fund a housing revolution’ to start conversations about how to shift the response to homelessness.
The panel
The debate was hosted by Sue Siddall, Crisis Advisor, NED and innovation for growth expert.
The panel offered a great mix of private and public sector organisations with expertise covering funding, policy, and technology start-ups, including:
- Amelie Busch — funding perspective, as an Investment Director at Big Society Capital she leads on new investment in social housing, impact venture and social lending. She oversees investment in a variety of funds including pre-seed impact venture, growth stage patient capital and social property loan funds.
- Daniel Mohamed — is the founder of technology company Urban Intelligence. Daniel is using his lived experience of homelessness and background as a planner, to help public sector teams like local councils, understand and reframe the real value of land and development opportunities through data.
- Matt Downie, MBE — is Chief Executive at Crisis and author of The plan to end homelessness. Matt sees the lack of social housing as a key hurdle to ending homelessness.
- Waqar Ahmed — is the Group Finance Director for London & Quadrant Group and has been in the Social Housing Sector for 18 years. Waqar played a key role in assisting the group to become one of the largest associations in the housing sector with over 100,000 homes, and a market value in excess of £10 billion.
What are the barriers to a housing revolution?
- Inefficiencies
Matt Downie began the discussion with the sobering statistic that there will be 60,000 people sleeping in hostels this evening, with another roughly 10,000 in night shelters. As well as a whole range of other homelessness accommodation projects, all of which cost more than regular everyday rent. So, we’re wasting funds managing homelessness, instead of understanding that our way out of the problem is safe, settled and genuinely affordable housing for people that need it.
“We know what the targets are in terms of the overall numbers, but we haven’t got the bit in the middle, which is each of us playing a part in an overall plan to get there. The ‘how’.”
Waqar Ahmed mentioned the amount of money that is now needed to remediate buildings in line with new fire and other building safety measures. This report on the global accounts of private registered providers shows that total maintenance and repairs spend increased by 20% last year to £6.5 billion.
“How many empty properties are there in the UK? And if you take the average value at £300,000, that’s something like £150 billion of cash just being wasted. We only need about 20% of that to recycle back into building more homes.”
2. Supply and Planning
Daniel Mohamed shared that in his opinion supply is the key issue, and that although planning is a part of that planners are often at the mercy of politicians.
“Everybody’s got different perceptions of what planning is, but I’m sure one of the common shared perceptions is that it’s notoriously slow and bureaucratic.”
“It is actually that way from both the inside, as well as from the outside. The big challenge that we have is that a lot of information that is used to make planning decisions is buried in really technical documents, which people spend hundreds of thousands of pounds to prepare…
Obviously, there are a lot of interested parties, both from the development perspective and the government perspective, as well as the various stakeholders from the public that all want to get involved.”
“At each stage of those processes there are plenty of opportunities to slow things down.”
There are plans to reform national planning policy through the Levelling-up and Regeneration Bill which might tackle some of these issues, however the Westminster government has been criticised for a number of delays.
3. Funding
Waqar shared his insights on why funding and finance is a huge hurdle in tackling the housing crisis:
“If we are talking about building 100,000 homes a year for affordable housing, and if we’re talking about two thirds being for rent and that rent is below market rate. And if operating costs are higher for social housing with support and the quality of service, it is a high cost.”
“There will be some subsidy required to build social housing. It’s as simple as that.”
“And if we are talking about 100,000 homes, in the region of £150,000 per home that subsidy is probably in the region of £10–50 billion a year. That’s 50 billion over five years. That dwarfs where the government’s current grant regimes are — they’re currently at £10–11 billion.”
“So, there is a huge funding gap.”
“If we look at the housebuilding industry, there are only two numbers that matter: 4 and 20. Will they sell 4 units per month or not (that’s the sales rate)? And will they make 20% margin? That’s the only thing that matters to the housebuilding industry. Currently where we are with the affordability crisis and cost of living crisis that is not achievable and therefore, we will see housebuilders slow down the rate of building.”
He went on to say that the funding sector could do more.
“There are an enormous amount of investors and banks that are very keen to put money into this sector, but they’re putting money into completed assets. There’s a very small amount of money that is targeting planning risk or construction risk.”
“Unless we find creative ways of getting more investment into planning and construction risk and a different approach to how government can support the sector, we’re not going to be achieving the targets that we aspire to.” — Waqar Ahmed
Amelie Busch said that her financial institution (Big Society Capital) is approaching it from two perspectives:
“One is that we’re looking to put our capital to use, while acknowledging that it’s a drop in the ocean compared to what’s needed. The other element is making sure that the capital is going toward delivering quality homes that are suitable, affordable and that meet the needs of the tenants. So really taking that people perspective.”
4. Perspectives and attitudes
As Matt Downie rightly shared, no one sets out to create homelessness but we have created the conditions for it, whether it be a lack of housing, or not challenging social attitudes towards people who are in extreme poverty.
“We still effectively have a system in this country which says that some people are deserving and others aren’t.”
He went on to say that that plays out in a number of areas — if you walk into your local council for help, you will be seen as deserving or not deserving under the law. And the same goes for the behaviour of social and private landlords and for a whole range of different policy initiatives.
Daniel Mohamed stated that according to a recent YouGov poll people just generally aren’t concerned about housing.
“Only 15% of people think that housing is one of the top three issues facing the country today.”
“Unfortunately, It’s down the pecking order compared to the economy, compared to health, defence, immigration and unfortunately unless we increase awareness of the problem and the cost, whether that’s the economic cost but also the social cost of a lack of housing, then we’re not going to shift attitudes.”
He went on to say that less than half of people support new development of housing in their area, dropping to 40% outside of London and the South of England. “So unless we can change those social attitudes and we can encourage politicians to back housing, the money will not find it’s way to the right areas because people won’t believe it’s really needed.”
What could we do differently to drive change?
- Shift to a housing first response
“I want to play my role in shifting the response to homelessness to one which is about housing and Housing First.”
“I actually think that if we had politicians talking about this as an issue, that figure (15% of people) would go up, but we don’t seem to have that. So basically, as a charity, what we could do is to sit back and complain and keep saying the number’s going up, or, we can do what we can to gather people who want to bring together solutions. And I think if you’re dealing with a human emergency, which we are, then that’s our duty. Our ambition is to make sure that our members get somewhere to live, and in doing so, to demonstrate that it’s possible.
But despite the lack of margins, there are innovations and there is a social purpose to people in a variety of different sectors that can and should be unleashed.
And we don’t know exactly how we’re going to get there, we know we will make investments in others with good ideas via the Venture Studio but above all is a sense of ‘can do’ that we really want to bring to this.” - Matt Downie
“What brought me to Big Society Capital was really the patient, long-term capital that we invest, the fact that we can look beyond the short-term opportunities or stumbling blocks, but really think about driving systems change.” — Amelie Busch
This long-term approach is what is needed if we have any hope of solving a crisis on such a scale as this — we need systems change, not short-term solutions. That of course means upfront investment for long term social and economic gains and a plan that spans across government administrations.
2. Utilise technology
“If we think about economic growth, which is capital, yes, it’s £16 billion a year but it’s also labour and it’s technological progress. And technological progress has been such a tiny fraction of the real estate industry that there’s so much room for growth here.” — Amelie Busch
Luke Graham is Head of Research at Pi Labs, a Venture Capitalist investing in tech solutions to improve the built environment. His blog post explores how technology can address the UK social housing crisis highlighting that PropTech offers both supply-side and demand-side solutions.
“On the supply side, local governments and housing associations can benefit from the rise in feasible modular construction companies offering faster and more affordable approaches to new builds.”
These more efficient modular approaches such as those employed by our portfolio company Agile Homes also provide the opportunity to achieve sustainability ambitions by going above the latest building and environmental regulations and methods.
“It really strikes me as quite obvious that in order to do some of the really complex things that planners should be doing — thinking about the cities, the regions, the countries, the world of the future, we should be using lots and lots of data to make quite complex decisions.” — Daniel Mohamed
Urban Intelligence is working with local authorities to appraise land for its suitability for new housing development. “We also look at things like capacity, viability, and again we’re doing this at scale, which is something that’s been previously quite difficult to do because it’s relied on lots of professional individuals working quite hard to try and fix things.
Overall, I’m quite keen to try and use the technology and innovation to make an impact.”
Daniel mentioned the fact that Urban Intelligence has had a great deal of support from the likes of Bridget Wilkins at the Department for Leveling up, Housing and Communities (DLUHC) and added that from a central government perspective “they don’t always do things positively, but the one thing that they are doing is digitisation and trying to promote efficiency across the board, and that’s really great.”
Another organisation that is leading and promoting innovation in the social housing sector is the Proptech Innovation Network which we’re proud to be part of. We agree with them that:
“The real estate and asset management markets offer some of the greatest challenges and also some of the brightest talent to solve them.”
This is something we’ve seen time and time again through the expertise and appetite of the founders and ventures that we meet and invest in through the Venture Studio.
3. Be more resourceful
“We’ve talked about empty homes, just lying there empty year after year. There must be some way of getting a compulsory purchase order on those properties. Taking a ‘use them or lose them’ approach.” — Waqar Ahmed
We are thankfully seeing innovations emerging in this space with the likes of Grand Bequest and others working to save and better utilise our existing stock to create more homes — but more will be needed to help these solutions reach the scale necessary to deliver significant impact.
Waqar went on to spotlight Entrepreneurs as part of the solution to the problem, referencing L&Q’s entrepreneurial beginnings from a £64 investment into their first property in 1963. He urged entrepreneurs in the room and elsewhere to think big and make as much money and return as possible — as the only way to tackle the crisis is with big balance sheets and big solutions.
4. Treat it like a Design problem
“If you take this on as a design or engineering issue, you can design yourself out of it. It becomes simpler.” — Matt Downie
-What is the housing need and what type?
-What are the support needs and what type?
-What are the preventative elements that we need to tackle it?
Sue proposed that if we could start by mapping out the user needs of all the stakeholders, there could be a simpler way of solving for it.
“But the first step is to organise ourselves to solve it and that’s an interesting shift as we’ve set up systems to manage this problem.” — Matt Downie
The beauty and efficacy of the creation of new ventures to tackle parts of this complex issue is the ability to start from scratch, design solutions with purpose and exist somewhat outside the existing system whilst also challenging it and pushing for systems change through evidence and delivering impact.
5. Professionalise the sector
“I think we need to professionalise the sector that deals with tackling housing for people who are in either affordability or housing need.” — Waqar Ahmed
This is a sentiment that has been brought to the fore in light of recent devastating failures in housing. In Kate Still’s recent article she highlights the need for better governance, effective leadership and strategic technical operational management skill as just some of the areas in need of a serious shake-up.
What is Crisis’ role in this?
“The evidence is really clear that the quicker people get access to a home of their own, the quicker their homelessness is over and the quicker we can end homelessness for all of society.”
“But time and again I see people who have had to spend weeks and months, sometimes years in hostels and night shelters just to have any chance of that. So of course we’ll continue to ask government to build the social homes that are needed and we need 90,000 a year to have any chance of ending homelessness in this country.
But also at the same time, Crisis itself is going to get into the business of providing housing for people that need it most and investing in solutions via our venture studio that will bring ideas and entrepreneurship to this really difficult problem.
So we’re looking for supporters, people who are interested to donate to our venture fund and help us do the work that’s so necessary.” — Matt Downie
Get in touch: venture.studio@crisis.org.uk
