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Lloyds unveils new public-private investment model to bolster social housing delivery
Lloyds Banking Group has unveiled a new investment model that proposes to repurpose government funding towards building new social housing, while reducing the cost of providing housing benefits.
The Social Housing Contract (SHC) would provide a payment to landlords, additional to their rental payment, linked to homes being made available for social rent.
The model was detailed in a white paper released as part of the one-year anniversary of Lloyds’ social housing initiative.
This mechanism would increase the guaranteed revenue being paid to providers of social housing, and increase the upfront private capital that can be raised to finance the development of new housing for social rent, the bank said.
The payments under the SHC are spread through time, which allows for a transition in government subsidy from housing benefits to supporting the delivery of new housing supply without relying on upfront borrowing.
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SHCs are projected to save the government between £2,500 to almost £8,000 per household annually, depending on the geography and household type in reduced benefits.
The bank has claimed that “there is the potential for payments under the SHC to be cost neutral, on average, to government” and deliver tens of thousands of new homes for social rent over 10 years.
Charlie Nunn, chief executive of Lloyds, said: “We need a new social compact for housing. This requires an investment programme which helps pivot housing welfare payments into a mechanism to attract capital into building new social homes.
“We need to support housing supply in a way which doesn’t put further strain on the balance sheets of housing associations and registered providers.”
The cost of funding housing benefits is higher across the private sector than socially rented households.
Therefore, Lloyds has offered two possible models which incorporate SHCs, a “low level” and “high level” degree of savings on household benefits.
Model One, the low-level amount, would result in an additional £45,000 available to be invested from the private sector which would be repaid by the government through the SHC. This model lowers the upfront grant per social home needed from the current £195,000 to £150,000.
Model Two applies to developments in London where housing benefit savings are much higher. The upfront grant provided by the government would drop by over half from £195,000 to £75,000, while the private sector investment would total £130,000.
Gavin Smart, chief executive of Chartered Institute of Housing, said: “The proposed Social Housing Contract is an interesting contribution to an important debate as government and the housing sector explore options to drive new social housing supply at a time when the financial capacity of both is constrained.
“The proposal also recognises that there is substantial interest in UK housing from investors and arguably no shortage of funds available, but that new models may be needed to unlock that capacity.
“A similar model has successfully operated in Wales for some time, so there is proof of concept, although grant has remained the primary funding model, and indeed the Social Housing Contract is clear that grant will still be needed.”
On the same day as it outlined the new investment model, Lloyds also revealed plans to redevelop parts of its estate and announced an additional £200m of investment into the housing sector.
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