The UK and US both face a crisis of affordable housing that new social enterprise models can help address.
These financially sustainable approaches, designed to both address specific problems and deliver wider social benefits, were the subject of a conference for community housing experts from both sides of the Atlantic convened by the British Council, Citi Community Development and Social Enterprise UK last month.
The event highlighted that fresh thinking on affordable housing is more urgent than ever and that each country has lessons to learn from the other about the development and application of innovative solutions.
In the UK, demand is outstripping supply with not enough affordable housing being built. In England alone, some 3.7m households live in rent-subsidised low income housing. According to the National Housing Federation, one in 12 families is on a waiting list for social housing – a number that has risen 65% since 1997. Moreover, government data shows that over 80,000 children in the UK were living in temporary accommodation in the first quarter of 2014.
The US also faces an extreme shortage of affordable housing – a challenge compounded by the fact that wages are not keeping track with housing costs. The National Low Income Housing Coalition reports that for every 100 extremely low income renter households (of which there are 10.2m in the US) there are just 31 affordable and available units. It adds that the average wait time for an affordable studio apartment in Washington D.C in 2013 was 39 years.
The shortage of affordable housing in the UK and US puts low income families at a greater risk of homelessness, of course, but also has a host of negative ramifications on health, education and employment. The situation may soon be made worse by the fact that both societies are ageing and government funding for affordable housing is decreasing in both countries.
“We need to develop the entrepreneurial approach to maximise the huge assets we have in a more effective and productive way,” said conference attendee Paul Tennant, chief executive of Orbit Group, one of the largest housing groups in the UK, with a housing portfolio of almost 38,000 homes and 1,300 employees.
One of the solutions may be found in the different ways affordable housing is managed.
In the UK, independent, non-profit housing associations are the country’s biggest providers of social housing, managing 2.5 million homes for more than 5 million people in England.
They own their stock in perpetuity, which enables them to secure long term, low interest loans to fund growth. Many have expanded by investing in new construction, and by acquiring and improving public housing stock transferred to them from local governments.
They earn income through rent and can receive government capital grants for construction, though these are rapidly diminishing. As grant levels decline, larger housing associations are tapping alternative sources of funding and cross-subsidising affordable housing development from profits on sales of homes. This makes the delivery of affordable services sustainable, and has allowed them to invest in housing stock improvements and community regeneration schemes.
“I wish I was in the UK in my field and that I was one of the agencies that received approval to accept housing stock and funding from government,” said Marcos Morales, executive director of Hogar Hispano. “It is a business model that would definitely work well here [in the US].”
In the US, non-profit community housing organisations control at most 20,000 units – a small amount compared to the UK – and compete with each other and with for-profit investors for housing stock. The government uses a system of vouchers and tax incentives to support low income families to access housing. The vouchers provide rental assistance to subsidise rental costs, but only one out of every four eligible families receives rental assistance, leading one participant to liken the system to a lottery.
The federal government offers tax incentives to stimulate private investment in affordable housing. In exchange, the developers or owners agree to rent the properties at an affordable rate for a period of 15 years, but after that, they can opt out of the program and reposition their properties as market-rate housing. As a result, “there is concern that as many as 1m units could leave the stock of affordable housing by 2020,” according to the US Department of Housing and Urban Development.
“We in the US need to continue to look for other sources of capital and explore how we attract investments that have a social benefit into our field,” said Edmundo Hidalgo, president and CEO of Chicanos Por La Causa.
Housing experts at the conference advised using available assets cleverly, creating a variety of income streams, and accessing funding from large institutional investors to create scale, notably through social impact investments, which generate both a social impact and a financial return.
Conference participants also underscored the need to move beyond housing to meet interrelated individual economic and social needs in communities.
In the UK, housing associations have long defined themselves as businesses with a social purpose and a growing number have set up their own social enterprises to address these broader needs. One, CleanStart, employs ex-prisoners to clear and clean its empty properties. Another, the Northern Housing Consortium, helps low income families buy essential appliances and furniture at discounted prices. What’s more, UK housing associations increasingly buy goods and services from social enterprises in order to maximise their social impact.
While the UK is leading the way in incorporating social enterprise models, US organisations are catching up.
“We started with doing our own property management as a way of retaining value and have evolved into other areas. Some of our enterprises have been successful and some have not, but we have kept trying to develop core competencies,” said Hidalgo.
In fact, conference attendee Phil Miles, director of regeneration and communities at Affinity Sutton, one of the largest providers of affordable housing in England, was “very interested in the restaurant franchising model used by Chicanos Por La Causa as a way of providing employment for low income families in a real world setting.” He added, “There is much to learn from other countries about financing affordable housing and we should not assume we have exhausted all potential routes to solve what is clearly a common problem.”
This shift to a more holistic and financially sustainable strategy requires leadership and a change in organisational culture. Yet as Anna Shiel of Big Society Capital, the world’s first social investment bank, noted at the conference, “new social enterprise approaches could have a huge impact if they are scaled up.”
Contact the British Council at social.enterprise@britishcouncil.org
More from the British Council partner zone:
- Approved! Social enterprise receives legal status in Vietnam
- Nobel Peace Prize winner Yunus urges leaders to create “poverty museum”
- Why universities are embracing social enterprise, from London to Chiang Mai
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