Investing in property to deliver social impacts such as housing refugees or helping homeless people find accommodation is maturing as an investment model, writes John Williams, head of property at Resonance, a Manchester-based fund manager.
Impact investing is not fluffy investing, it is simply aligning investors with social issues upon which they wish to see their investment have a positive impact. Carefully structured impact investment can provide a financial return to investors.
Resonance, a social impact investment company and fund manger that creates and manages social impact funds, is currently delivering this combination of financial return and social impact using a range of investment vehicles to address a number of social issues, including:
Homelessness – through the creation of traditional limited partnership real estate funds, Resonance has built portfolios of residential property which are leased to leading homeless charities, such as St Mungo’s in London, which then house homeless families and individuals, taking them out of inadequate and expensive temporary accommodation such as hostels and B&Bs. These property funds have successfully invested within London and the South to date and Resonance now has plans to take the National Homelessness Property Fund into other key UK cities in the North of England, which would see these funds grow from their current size of £130m to over £200m during 2017.
As with any property fund, investors receive yield and capital appreciation, but these funds also report annually on the social impact of providing this type of “stepping stone” opportunity to individuals housed in the properties. Homeless people often have trouble renting because of a lack of address, proof of identity and track record making payments. Leasing whole blocks to charities that accept homeless people enables them to overcome this first step into the market. The investor base for these funds is wide and includes institutional investors and local authorities.
Community cohesion – through the creation of a loan fund, Resonance has been able to provide flexible loan finance to community groups around the UK who are developing affordable rental housing schemes in their local area. The Affordable Homes Rental Fund can fill the gap where mainstream banks struggle to lend on sufficiently flexible terms. A tailored loan allows community groups to deliver their project and build up their track record to eventually access mainstream lending. An example of such a loan was the financing of Broadhempston Community Land Trust in Devon where £1m of development finance was provided to a new community group for a self-build project. This allowed local families to remain in their village to support community networks and relationships. Investors in these funds are typically foundations and endowed trusts, and their financial return comes by way of a fixed rate of interest on their investment which is then lent to community groups.
Dismantling poverty – all around the country innovative social enterprises are using business models to tackle the roots of poverty in our communities, but often struggle to access growth finance to grow. Resonance has been using Social Investment Tax Relief to deliver this finance on a basis that works for enterprises and investors. Although SITR is not available on property rental or development, it can be used to finance the buildings these enterprises need for their operations. For example, through investment from the Resonance Bristol SITR Fund, a Community Interest Company called Paper Arts was able to acquire and refurbish a commercial building to grow their business. Paper Arts focuses on young people not in education, employment or training, long-term unemployed and vulnerable adults. Paper Arts’ objective is to develop creative potential leading to enterprising, fulfilling, self-employment, by providing business support, workshops and studio space to enterprising artists. Investors into this fund are typically individuals who receive their return by way of interest on the loans which is then amplified through the Social Investment Tax Relief. Resonance is currently planning to launch similar funds in other UK city regions, including the West Midlands and Greater Manchester.
There are many more challenges facing our communities in addition to the three themes highlighted above. But the common link is often well structured property related investment, achieving intentional social impact. Property is a way of creating a place: a place to live, a place to learn, a place to grow, a place to build, a place to create, a place to heal and ultimately a place to simply be. Not surprisingly then, we expect that social impact through property investment will remain a growing theme in the decades to come.