How social investment financing can help tackle homelessness

Social investments are designed to positively affect a social problem while making an economic return that is around market rate. Evaluation research on social investments is in the early stages. Social investment proponents consequently have limited resources to address concerns about risk that private investors often express.

The implementation and impact evaluations we published in April are the first evidence that social investments can be used to purchase affordable homes for households experiencing homelessness in Britain.

Our research analysed two social investment funds that partnered with four service providers in different parts of England. Those funds purchased over 200 properties with a £30m seed investment from Better Society Capital and the government.

“Each fund gave the service provider control over property maintenance. This allowed service providers to adapt properties for tenants with disabilities and build rapport by answering maintenance requests”

Service providers said the properties were higher quality than they usually accessed for clients in the standard rental market. Each fund gave the service provider control over property maintenance. This allowed service providers to adapt properties for tenants with disabilities and build rapport by answering maintenance requests.

Doing so helped formerly homeless tenants sustain their tenancies, reconnect with health services, receive workforce development training, access employment and/or re-establish relationships with family members.

Social investment has also had positive impacts on homelessness service providers. The funds allowed some to grow their housing portfolio, secure new grants from local government, obtain additional social investments, strengthen ties with other third-sector agencies in their community and/or expand services to new locations.

The aforementioned successes do not mean there were no implementation problems. Soaring housing costs complicated procurement for some councils, but all of the properties were eventually purchased after some policies were modified.

The second issue was delayed housing benefit payment. Some service providers had a distanced relationship with their council’s housing department. This made it harder for them to address housing benefit interruptions. Their experience highlights the importance of cross-sector dialogue for this kind of social investment.

“As local authorities work to meet the Labour government’s goal to build 1.5 million new homes, social investment financing is a promising way to offset shortfalls in public sector grants”

The last barrier was negotiating lease contracts with combined authorities. Disagreements over details slowed implementation in one location, but this was not an issue in other councils. Although this issue was eventually solved, fund managers should note the potential for this delay when planning future social investments like this one.

That said, the evidence from our evaluation suggests social investment is a viable way to expand affordable housing for households experiencing homelessness. As local authorities work to meet the Labour government’s goal to build 1.5 million new homes, social investment financing is a promising way to offset shortfalls in public sector grants.

Our research can be used to promote social investments to private investors and/or plan future social investments with the lessons we learned while producing those reports. Doing so can help councils access trillions in untapped capital that vulnerable households need to prevent or end homelessness.

Christopher Fox, professor of evaluation and policy analysis, and Gareth Grainger, research associate, Manchester Metropolitan University