Boris offers £10million for empties

London Mayor Boris Johnson has offered £10million under his Housing Covenant to Big Issue Invest (BII) who will in turn lend the money on to social businesses that can produce affordable homes out of empty propertiy.

The story on the Big Issue Invest website sums up the initiative as follows:

The Mayor of London, Boris Johnson, is forming a partnership with Big Issue Invest to renovate empty properties into new affordable homes, whilst creating work opportunities for adults with a history of homelessness or long-term unemployment.

The Mayor has selected Big Issue Invest for an investment of £10 million from his Housing Covenant Fund. Big Issue Invest will invest in social enterprises which are seeking to renovate run down, empty homes or buildings and convert them into good quality affordable housing for Londoners to buy or rent.

The funding will revolve over a 10-year period and result in over 300 empty homes being transformed into good quality low cost housing. In addition it will provide long term unemployed people, veterans and out of work young people from across London the opportunity of employment and training in construction.

Gift horse or poisoned chalice?

Big Issue Invest has established a strong track record of supporting social enterprises over the years and obviously has a strong interest in housing, particularly with regard to those who are vulnerable to street homelessness. So if anyone can make this work, BII should be able to do so. They can be expected to have done plenty of homework and indeed cite PHASES as one of their successful projects. Nevertheless there are reasons to be cautious about the potential of the fund as currently described.

Presumably, Big Issue Invest will receive its money interest free from the Mayor. But as with similar social funders (e.g. Resonance, Big Society Capital), it must be assumed that any social enterprises borrowing from the fund will do so on under an interest-bearing loan. Normal rates in such circumstances are around 5%, sometimes higher during the development period. The question arises as to how feasible it will be in such circumstances for an organisation to provide "affordable housing", which for normal purposes (certainly those of the DCLG's Community Grants Programme) is supposed to involve rents which are 80% of the market rent.

Even the CGP , which struggled somewhat in London because of soaring rents and property values, was essentially about giving grant to community-led housing organisations not loans. This is the norm. Historically, social housing has always relied on (non-returnable) grant. Billions of pounds have been given to housing associations over the last four decades for just that purpose and the programme continues, now through to 2020. But somehow the idea has taken hold that where empty homes are concerned, affordable housing can be provided for free. Scotland has the dubious distinction of having led the way here and it would be interesting to see how well that scheme is doing. On the other hand, the successful large-scale loan schemes operating iIn Wales and Kent make no requirement for affordable housing. Similarly, schemes like Bristol Together, which do a magnificent job training and rehabilitating ex-offenders whilst bringing empty homes back into use for sale, do not generate "affordable home ownership": the homes are sold at full market value and this is essential to the model.

Grounds for optimism?

There are grounds for optimism, however. Firstly, there is the option of using the BII fund as gap funding, with subsidy available from another source. A good example would be the funding provided by Resonance to support an affordable housing project in North Norfolk. Additional funding came in that case from both the Homes and Communities Agency and North Norfolk Council (see the case study in our Practice Library - sorry Full Members only). The Resonance-supported temporary accommodation fund for St. Mungos/Broadway is also a potential model.

Secondly, an important element of flexibility may lie in Boris's conception of "affordable housing", which might be different from that normally adhered to by the Homes and Communities Agency outside of London. It is understood that the normal requirements have already been set aside in London on the GLA's Empty Homes Programme, with rents allowed at "homeless accommodation" levels: it is doubtful whether these are as little as 80% of the market rents in most areas. The case study cited on the PHASES website (a project dating from 2008) doesn't mention the rent levels but does talk about the tenancy of a previously-homeless family proceeding under the local council's rent and deposit scheme. This might be considered "social housing" but it would not necessarily count as affordable housing in most parts of the country unless the rent were also set at an appropriately low level.

Finally, there is no doubt that community-led housing organisations are capable of negotiating low rents with owners and renovating homes at much lower cost than bigger organisations. There are certainly deals that can be done. The question is, how many?

Reality check

More information about this partnership is needed before any final judgment can be made. The aim is creditable but the devil is in the detail. The doubts expressed above may seem, and hopefully will prove to be, unduly negative. But it is important that empty homes programmes are set up on a realistic footing. The Empty Homes Network has consistently called for proper research into what works and what doesn't work. The lack of well-researched templates continues to hold the sector back. Evidence-based policy in the empty homes field cannot develop without the evidence.

EHN has been keen to promote a further empty homes programme including a "CGP2" for community-led housing organisations. The fear is that London thinks that, in this new partnership with BII, it already now has a CGP2 in place. It doesn't. Commissioners need to get the message: if you want affordable housing, pay the going rate. Social enterprises already provide added value through the training, employment and rehabilitation services they offer. It doesn't seem reasonable to place on them additional expectations such as producing affordable housing like a rabbit out of a hat.

What would be positive would be for Boris to announce further funding in the form of grant to sit alongside the BII loan funding and put social enterprises on a level playing field with other providers of affordable housing such as housing associations.

Meanwhile, it is understood that rumours about Boris providing two fish and five loaves and inviting social enterprises to proceed to Parliament Hill to feed a multitude of 5,000 are actually unfounded.

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