The newly elected government has met leading figures from the country’s impact investment sector in a bid to mobilise funding for housing and other social priorities.
A combined £550m (€659m) of planned investments by Schroders, Man Group and Resonance to tackle the UK’s housing crisis were highlighted by the UK’s recently elected Labour government, as it held a meeting with financial institutions designed to stimulate greater use of impact investment.
The government is keen to tap impact investment to overcome a chronic shortage of affordable and social housing, as well as filling funding gaps in other areas of the economy, at a time when its own financial resources are stretched thinly.
Some 1.3 million people are estimated to be on UK local authority social housing waiting lists. The government, elected in July, has said it hopes the housing crisis will be tackled by building 1.5 million homes over its five-year electoral term – an ambitious target which the housing industry says will likely be missed without significant state support.
The commitments from the three institutions are expected to result in the building of at least 5,000 new homes, mainly social housing and “affordable” homes.
Schroders confirmed a £50m commitment from Homes England, a government agency, into its real estate impact fund, which is initially seeking to raise £200m to deliver 5,000 homes to address social inequality, while providing “appropriate” returns to investors. First investments are due before the end of 2024. The fund’s focus is on helping to deliver more social and affordable housing, regenerating town centres and investing in social infrastructure.
Man Group said it would invest a further £100m to deliver affordable and environmentally sustainable housing for communities across England, with 90% of these homes designated as affordable housing. The focus will be on delivering homes with a low carbon footprint and addressing the housing needs of key and essential workers. The firm said it had already committed £385mn to affordable housing since 2021.
Resonance said it expected to increase investment into an initiative tackling homelessness to £250m from £79m. The initiative invests in residential property to help people move out of temporary accommodation. Resonance is seeking to reach £1bn of investment in this area over the next five years, working directly with local authorities and housing partners.
Government seeks impact investor support
At the October 15 roundtable, the chief secretary to the UK Treasury, Darren Jones, hosted to a group of high-profile investors with impact lending operations, including Schroders, M&G, Bank of America, Blackrock and Barclays, in an effort to create conditions to generate further impact investment.
“Investors tell us they want to help in delivering a better Britain. Working in partnership with government, social impact investing can change people’s lives and improve communities across the country. We are dedicated to creating the right environment for impact investment,” Jones said.
Total impact investment in the UK amounted to £76.8 billion of assets under management at the end of 2023, according to a recent report from the UK’s Impact Investing Institute (III).
Kieron Boyle, the III’s chair, who attended the meeting, said participants discussed practical ways the government could leverage capital at scale for public outcomes through financing underserved SMEs to fuel growth, support for clean and community energy across the UK and financing solutions for preventative health and affordable housing.
He said mobilising impact investment provided the government with the opportunity to reach underinvested places using funding mechanisms that were “inclusive by design”. Boyle said the intentionality and measurement of impact investment was essential to align private capital with the public interest.
Stephen Muers, CEO of Better Society Capital (BSC), said he was encouraged to see that the new government recognised the power of social impact investment to change lives and improve communities.
“The sector is growing, with a 12-fold increase in social impact investments made in the UK over the last 12 years, but we need to accelerate this investment if we are going to address the increasing inequalities in our society. This announcement from government illustrates how social issues, like housing, can be addressed by harnessing private investment for impact,” he said.
A report just published by BSC found pension funds are the largest investors in the UK’s social impact investment market, which it said grew 7% from 2022 to £10bn.
