Exploring routes to homeownership through social investment

Social investment has been crucial in supporting solutions to the temporary accommodation crisis. As funding in this area grows, JRF is looking at how our social investment could tackle another facet of the housing crisis: the rise of long-term renters and widening wealth inequality.

Taking stock of our housing social investments

It’s been 10 years since JRF started our £20 million social investment programme aligned to our commitment to solving poverty in the UK. One of our key focus areas as an organisation has always been housing. This is underpinned by our strong belief that everyone should have an affordable, decent and safe home they can live in for as long as they want or need. This belief is also core to our social investment programme; over 25% of the money we’ve currently got invested is in housing-related projects. Late last year, we decided to take stock and reflect on our learning from supporting these different projects.

Most of our housing social investments provide decent homes for people facing housing crisis. They provide safe and high-quality homes to individuals, and sometimes their children, who find themselves trapped in low-quality temporary accommodation, or supported accommodation, due to the chronic shortage of social and affordable housing. This includes our £400,000 direct investment into the social enterprise Micro Rainbow, which supports LGBTQI people fleeing persecution.

It also includes our indirect investments through fund managers, which are organisations that pool money from many different investors. In this segment of the impact investment sector, fund managers work with charity partners to secure good quality homes for the people the charities serve. Fund managers have either supported charity partners to buy the houses outright, or have purchased houses and then provided charities with houses (via long-term, fairly-priced leases) that they can then rent on to individuals. We are investors into Resonance’s National Homelessness Property Fund and their Women in Safe Homes Fund, committing £500,000 and £300,000 respectively. We have also invested £1 million into Social and Sustainable Capital’s Social and Sustainable Housing Fund.

Growing solutions to temporary housing crisis

We’ve seen incredible and impactful growth in the temporary and supported accommodation sector since making our investments between 2017-2021. Whilst we are proud that JRF has committed around £2 million, we knew that our capital was never going to be enough to tackle the unjust and growing scale of this side of the housing crisis. JRF analysis shows that councils’ spending on temporary accommodation doubled from £790 million in 2012/13 to £1.59 billion by 2021/22.

However, we do know that our small contribution has helped fund managers grow and catalyse investment on a far greater and broader scale. We’ve heard from our fund managers that JRF’s name and mission has supported them when fundraising from investors that are newer to the impact space and, crucially, also from much larger investors. In parallel, we’ve also heard directly from our co-investors who value JRF’s involvement in these funds. We’ve seen these fund managers move from mainly securing investment from impact-driven investors (like JRF) to attracting investment from larger, more traditional institutional investors. This has included local government pension funds. In the UK, it is estimated that the pension sector has assets valued at just under £3 trillion. This is the scale of investment that could really shift the needle in tackling the housing crisis. We very much welcome this growing interest in these proven, impact-driven social investment solutions.

The work is far from done and we remain committed to the housing social investments that we have made. But given our modest programme compared to the scale of capital needed, we realise the important catalytic role that we can play in supporting newer, less tried-and-tested solutions to the wider housing crisis. Last year we started to wonder: what other social impact solutions for a more equitable housing market could we support, and help drive more mainstream funding into?

Rise of long-term renters and wealth inequality

Since the Global Financial Crisis rates of homeownership, particularly for first-time buyers, have fallen significantly, and the growing number of households stuck in the private rented sector or living with their parents has been another dominant feature of the housing crisis.

These changing patterns of homeownership have also widened wealth inequality, as some households have been locked out of owning their own home while others have been able to rapidly expand their wealth by using their existing assets to build property portfolios. This has resulted in an ever-increasing proportion of the UK population that cannot afford to buy, and as a result have become long-term renters, living in more financially precarious situations than homeowners.

This has particularly impacted certain groups, for example younger generations, especially those living in larger cities and those without family wealth. Additionally, differences in homeownership rates are a significant factor in the ethnicity wealth gap, with some racially minoritised households, including Black Caribbean, Black African, Bangladeshi, Pakistani and Arab households, having below average rates of homeownership.

In response, a significant amount of attention has been focused on attempts to support households into homeownership, for example through policy interventions such as the Right to Buy, Help to Buy, and the increasing support for affordable homeownership models like grant-funded government Shared Ownership and First Homes. However, each of these models have been critiqued in differing ways for being ineffective, poorly targeted, and also redirecting public funds from rented homes for the poorest towards more affluent groups, who are not priced out of homeownership but have benefited from the schemes nonetheless. As a result, government support for interventions to support homeownership is waning, exacerbating the rise in long-term renters who struggle simultaneously with increasingly unaffordable rents and are being priced out of the housing market.

Social investment opening routes to ownership

We are aware, through our market engagement and direct approaches, that a number of organisations are innovating models to help people buy a home, either through some form of discount or supported means of saving for a deposit, or by offering a more secure alternative that helps build wealth and security.

We feel these models could play a role in the housing market and wanted to find out how they work, the impact they could have, the barriers they face, and the role a social investor like JRF could play in supporting them. To this end, we commissioned The Good Economy to help us further understand this landscape in the UK. The Good Economy report can be found here.