Invest in Housing?
Weslo Housing Management is a registered social landlord operating in West Lothian, Falkirk and the surrounding areas. Started in 1994, the company has brought literally hundreds of affordable new houses to the sector using a variety of funding models - some traditional, some less so. The one constant though, that any development needs, is money and at the current time more than ever before, there's not enough to go round. So we're all being asked to use our imagination in 'Fresh Thinking, New Ideas'. Weslo welcomes this discussion and debate and will shortly be submitting its response to the Scottish Government. In the meantime however I wanted to float publicly an idea we've been trying to promote within the UK Government for a few months now with the assistance of Michael Connarty, one of our local MPs.
We know that the Government is investigation the potential for institutional investment in social housing in Scotland. In Chapter 2 of 'Fresh Thinking…' we learn that Bond funding and Institutional investment by pension funds and life companies are two of the alternative methods of fund raising being investigated. Again, we welcome such radical ideas but would also pose another option. Why not make investment in the supply of social housing attractive to individuals? The bond and pension fund areas tend to work in the tens of millions or even billions. Yet in Scotland, a social landlord can, in broad terms deliver a 24 unit development for around £3m. Typically they would require around 60% of this in grant from the Government, funding the remainder from private borrowing. So in this example the landlord would need £1.8m in grant.
Why not from a new fund comprising investment from individuals who are attracted by the idea of a highly visible ethical investment which provides the new affordable housing our country so desperately needs?
The introduction of tax incentives to launch such investment would, we suggest, make this new form of social investment a welcome arena for people who like to see their investment make a difference as well as a profit.
How would they make a profit? Well the investment would take the form of a transferable security measurable over the period of the term loan taken on by the landlord to complement the investment and deliver the housing. The investor can sell on the security market at any time and release the capital. At the end of the term loan, the landlord 'buys' the whole portfolio using finance from a new term loan, thus ensuring the houses provided remain in the affordable sector and the security holder(s) achieve their return. How do they achieve a return? Well, this relies on capital growth in the value of the properties and before anyone reminds us of the current recession and the downturn in property prices, they would have to acknowledge that generally over the last 500 years bricks and mortar have proved to be a fairly sound investment!
The illustration above is admittedly painted with a broad brush and sure, there will be pitfalls and problems which are not addressed here. Examples of public work do exist in the UK - notably in Sheffield which has a history of funding by public subscription - so we're not starting with a completely blank page.
So, at a time when the Government is calling for a new spirit of entrepreneurship to innovate and harness new solutions, it is should not be beyond the collective ken of the nation to tap the mother lode of ethical investment and direct a proportion of this resource to meeting the demand for affordable housing from the 300,000 people on our nations housing waiting lists.
Mike Bruce, Chief Executive,Weslo Housing Management
www.weslo-housing.org