The use of social investment to tackle homelessness can provide a blueprint for other policy challenges

Policymakers must consider creative options to tackle entrenched challenges, says former senior civil servant Stephen Muers, who is now chief exec at Big Society Capital
Converted transport shipping containers made into housing for the homeless in Brighton Photo: Simon Dack/Alamy

By Stephen Muers

05 Apr 2024

The statistics for our nation’s temporary accommodation crisis are sobering. Over 100,000 households are currently living in temporary measures such as hostels and B+B’s – the highest figure on record. These are not just numbers; they represent real people and real families, facing unimaginable hardships.

New figures have been released about the devastating impact this is having on young people. More than one in 25 London children – that’s one for every classroom in the city – were recorded as living in temporary accommodation at the end of last year. And last month, the National Child Mortality Database said that the number of children who have died in temporary accommodation is up to 55 over four years. Many of these deaths have resulted from insufficient space for a cot in the accommodation provided.

The financial burden of this sticking plaster measure on local authorities is extraordinary. Councils across England last year spent £90m per month on temporary accommodation, up 40% from the previous year. This has generated increased strain on overstretched council budgets and is one of the key contributing factors to the current financial crisis across local government.

Both parties have promised to address this grim reality should they succeed at election time. For example, in its plans to get Britain building again, Labour has said it will deliver one and a half million new homes within a first term.

However, it is unclear how these goals will be achieved with taxpayer funds alone. We know the next government, whoever leads it, will face a very tight fiscal situation. And providing safe, secure and stable accommodation for 100,000 households requires many billions of investment.

A glimmer of hope

This is where social impact investment comes in. This approach channels millions of pounds from institutional investors such as pension funds, local authorities, and trusts and foundations into homes delivered by expert housing associations and charities on the frontline.

I am currently CEO at social impact investor Big Society Capital, which has been advocating this model for over ten years – and in that time the market has grown over tenfold, now reaching £9.4bn.

We launched new research in March demonstrating the impact this investment can have in tackling homelessness. Through analysis of five funds managed by social property fund manager Resonance Limited, it showed that they provided safe homes for 3,300 individuals facing homelessness— including 1,607 children.

The benefits extend far beyond mere bricks and mortar. Importantly, these homes are not merely shelters; they are high quality homes in safe areas where individuals can rebuild their lives with dignity and hope. Our analysis, conducted by Alma Economics, reveals that tenants in this accommodation have a significantly higher quality of life compared to those in temporary accommodation – which we valued at being worth £17,500 per person.

Crucially, in the context of the fiscal situation, taxpayer savings generated by these initiatives are substantial, at £140m over ten years. This is money that would have otherwise been spent on temporary accommodation plus the other devastating costs generated by poor housing provision such as healthcare and criminal justice spend.

What’s more, every £1 of investment spent on one of Resonance's homelessness funds over the next decade has the potential to generate £2.31 in additional financial and wellbeing benefits.

"Spending smarter” to drive change

These funds have proven what is possible, but there is a huge opportunity for policymakers to drive this model to a much greater scale. Our analysis shows that by reallocating money that government will spend anyway in a way that leverages in private impact investment we could quadruple our impact, providing housing for tens of thousands more individuals while generating over a billion pounds in public savings.

Policymakers already have a blueprint for how to do this. In 2021, the Department of Levelling Up, Housing and Communities reallocated £25m of existing spend into these funds. This helped attract over £130m from other investors, an extremely efficient and effective use of public funding. 

Before joining Big Society Capital I spent many years as a senior civil servant. I know that these kinds of approaches, thinking creatively about how to use government spending alongside other investment, are not always easy. Another grant fund or local authority funding pot would be more straightforward. But what is different now is that we have the track record both of how parts of government have worked with impact investors and of models that have demonstrated positive impact at scale on key social problems. I believe policymakers need to be including these kinds of options in what they place in front of new ministers of any political persuasion after the election.

We now have a model with a track record in delivering safe, affordable homes for over ten years. Together, we can transform temporary accommodation into permanent homes, despair into opportunity, and crisis into hope – by spending money smarter.

Stephen Muers is chief executive at Big Society Capital and a former senior civil servant at the Ministry of Justice, Cabinet Office and Department for Energy and Climate Change

Read the most recent articles written by Stephen Muers - The public sector cannot reach its levelling up goals alone

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