It’s no secret that the UK has a chronic housing shortage, especially in terms of affordable homes and social housing.
Following decades of decline and under-investment in the sector, it is estimated that over 1 million households in England are currently on social housing waiting lists, with the government, local councils and housing associations all under enormous pressure to provide more affordable homes for families.
One way local councils and housing associations are tackling the problem is by acquiring blocks of private properties to rent to social tenants, helping find homes for those on the waiting lists while delivering rich rewards for investors.
Decades of Decline and Under-Investment
Social housing has been declining for decades – and the consequences are dire.
According to Shelter, there are currently 1.4 million fewer households living in social housing than there were in 1980, with demand massively outstripping supply.
One of the biggest problems is a massive fall in the number of social homes being built each year. In 1990, around 28,000 new social homes were constructed. In 2020, the figure was just 7,000.
Only exacerbating the problem is the number of social properties being demolished or sold off through schemes like Right to Buy. The overall net result is an annual loss of 24,000 social homes each year since 1990.
Of course, all this is just part of an even bigger problem. Not enough affordable homes are being built in general – and of those that are, many are not actually ‘affordable’ for many families.
Overall house building in the UK has halved in the last 50 years and property price growth having massively outweighed salary increases, making home ownership a distant prospect for many.
The housing shortage is worst in London and the South East, but it’s a huge problem across much of the UK – especially in cities like Edinburgh, Bristol and York.
In the social sector, councils and other social housing providers are also under huge pressure to tackle the problem of unsafe and uninhabitable properties. Last year, the shocking conditions being endured by many families living in social housing was widely reported in the media.
Social housing providers are rightly taking action.
One solution to the problem is actually coming from the private rented sector and the opportunity for social housing providers to acquire blocks of properties from major private landlords on long-term leases.
The Affordable Homes Programme (AHP)
Investment in social housing is an integral part of the government’s Covid recovery plan, delivered through the Affordable Homes Programme (AHP).
In the March 2020 budget, the government announced an additional £9.5bn of funding, taking the total to £12.2bn for the next five years from 2021 to 2026.
As part of the plans, £1bn of support for renters was announced in the form of increased housing benefits, meaning the local housing allowance would cover at least 30% of UK market rents.
In an effort to reduce the shortfall, a new government-backed scheme was also introduced. Local councils, housing associations and charities are now looking to acquire blocks of houses and apartments from private investors on long-term leases.
For social housing providers, the benefit is obvious. It allows them to increase their housing stock without needing to invest huge amounts upfront, which is especially important given the huge pressures they are facing and the fact their budgets are often extremely limited.
For private investors, the scheme offers the chance to tap into a heavily funded, undersaturated sector while also doing some ‘good’ in helping to tackle the UK’s chronic social housing shortfall.
The Avora Capital Solution
One way for private investors to tap into the opportunities afforded by social housing is through Avora Capital, our smart ‘hands off’ investment solution with an asset portfolio across the United Kingdom.
Social Housing (AHP) forms an integral part of the Avora Capital portfolio as we believe it offers long-term sustainable asset growth and consistently high rental returns.
Upon the acquisition of each portfolio, we enter into a 25-year index linked lease with a government-backed housing association or charity. The lease is linked to inflation, which adds significant value to the portfolio.
With Avora Capital, investors have the chance to reap the rewards of buy-to-let without any of the day-to-day hassles of being a private landlord.
Important note: The information provided in this article is general in nature and does not constitute personal financial advice. If you are unsure whether an investment is right for you, please seek professional advice. If you choose to invest, the value of your investment can both rise and fall so you may get back less than you put in.