Social Property Investing: The Ultimate Guide for 2024

What is Social Property Investing?

Social property investing centres on a collaborative approach, partnering with governmental bodies, housing associations, charities, and the third sector to tackle pressing societal challenges, notably homelessness and deprivation. This strategy not only offers a lifeline to those who might otherwise struggle to secure housing but also promises institutional investors a consistent and reliable return.


By channelling funds into social housing initiatives, investors gain the assurance of their capital being safeguarded through extended government leases, some spanning up to two decades.


The concept of social housing emerged as a solution to provide affordable accommodation for those in dire need within the UK. Designed as a more economical alternative to the private rental market, social housing ensures that every UK household has access to reasonably priced lodgings. Typically, these homes are overseen by local councils, housing associations, registered charities, and social care providers. Tenants of such properties liaise directly with these organisations, which act as their landlords.


While the term “social housing” is broad, encompassing various types of accommodations for diverse needs, its core principle remains the same: to offer safe and stable housing for those who require it. This includes provisions for low-income families, individuals with disabilities, the homeless, victims of domestic abuse, asylum seekers, and other vulnerable groups.


Operating on a not-for-profit model, housing associations and local councils serve as the primary landlords for social housing tenants. Although “social housing” and “council housing” are terms often used interchangeably, subtle distinctions exist between the two, especially concerning tenant rights and rental contracts. The primary difference lies in ownership: while local councils own council housing and determine the rent, housing associations own and manage social housing.


The current landscape underscores an acute demand for affordable housing, presenting a lucrative opportunity for prospective investors. Given that a significant portion of the rent in social housing is subsidised by the government, investors stand to benefit from a steady income stream. Moreover, they contribute positively to society by bridging the housing gap. For landlords contemplating an investment in this sector, understanding the nuances of social housing is paramount.


Who is Social Housing For?

Social housing primarily caters to individuals or households with limited or no income, offering them a viable route to secure housing with affordable rent. The selection process for tenants in social housing markedly differs from that of private rentals.


While anyone in the UK can apply for social housing, the allocation is determined by a priority system, ensuring that the most vulnerable—those at imminent risk of homelessness, eviction, or other threats—are safeguarded. Each housing association or local authority may have its own set of eligibility criteria, tailoring the priority list to address the most pressing needs within their community.


To be eligible for social housing, applicants typically must be:

  • A British citizen, aged 18 or over, who resides and is settled in the UK (though some councils consider applicants as young as 16).
  • A citizen from another country who possesses the right to stay in the UK without any duration restrictions.


Given the limited availability of social housing and the often extensive waiting lists, many councils employ a points-based system to prioritise applicants. Key factors that can elevate an applicant’s priority include:

  • Current homelessness status.
  • Residing in overcrowded conditions.
  • Medical issues exacerbated by present living conditions.


Additional considerations that might influence an applicant’s eligibility include:

  • A longstanding connection or residency in the area.
  • Employment within the local vicinity.
  • Providing care for someone in the local community.
  • An income that falls below a specified threshold.



What social groups are given priority for social housing?

Certain groups are often prioritised to ensure they have a safe and secure place to call home. Among these are individuals grappling with disabilities or specific health challenges. Single parents, juggling the demands of raising children alone, also find themselves high on the list. The elderly, with their unique needs and potential financial constraints, are another key group. Then there are those enduring the hardships of subpar or unsanitary living conditions, as well as households bursting at the seams due to overcrowding. Young families, especially those with tight budgets and young children to care for, are also given precedence. Additionally, refugees, migrants, and asylum seekers, arriving in the UK in search of safety and a new beginning, are considered a priority. Lastly, those teetering on the edge of homelessness or already without a roof over their heads are undeniably among the most urgent cases.


Social Housing and the acute UK Housing Crisis: the Facts

The UK has witnessed a significant surge in its population over the past decade, growing at an average rate of 0.6% annually. This growth underscores the pressing need for housing that aligns with this expansion. Yet, the construction of new homes has dwindled to its lowest in years, intensifying the demand for affordable housing. Recent data indicates that the UK managed to provide just 57,644 affordable homes last year, a staggering number that falls nearly 90,000 short of the target required to address the housing deficit.


The housing market has also seen rents and associated costs skyrocket, with projections indicating further hikes in the near future. As property prices soar, the challenges for young individuals, migrants, and the vulnerable to secure housing become even more daunting. This trend amplifies the importance of social housing, which offers a respite from the escalating costs prevalent in the private rental sector.


Migration has played a significant role in the population increase, accounting for 58% of the growth between 1991 and 2018. With refugee numbers on the rise annually, the urgency to provide them with safe, affordable, and stable accommodation cannot be overstated.


Big Society Capital’s recent data reveals that the social housing sector dominates the £6.4 billion social impact investment market. This sector has seen consistent growth in private investments over the years, positioning it as a promising avenue for future expansion.


The clamour for social housing has reached unprecedented levels in recent times. Records from the UK Parliament Archives estimate an annual requirement of about 340,000 new homes. However, since 2010, England’s government has only managed to deliver over 542,000 new affordable homes, a figure that doesn’t meet the yearly demand. While government initiatives strive to bridge this housing gap, private entities are exploring innovative solutions, seeking investors to help alleviate the housing crisis.


Who are the major providers of social housing in the UK?

In the UK’s endeavour to provide purpose-built homes, significant contracts have been awarded to prominent entities like Mears Group and Serco Group. These groups received a combined funding of £2.9 billion to furnish accommodation for asylum seekers. This allocation of funds to housing service providers is anticipated to usher in a transformative phase for the sector, enhancing its quality and resilience. The introduction of the Asylum Accommodation and Support Services Contracts (AASC) aims to facilitate individuals navigating the asylum process, ensuring they receive the necessary professional assistance. These contracts signify a commitment to elevating the standard of social housing for the UK’s vulnerable populations. Now, providers of social housing are mandated to conduct thorough maintenance inspections, promptly reporting any discrepancies to the Home Office. Moreover, these guidelines ensure that identified issues are addressed within a stipulated timeframe, ensuring no lapses in maintenance.


On the investment front, Social Housing Real Estate Investment Trusts (REITs) currently manage assets worth approximately £2 billion in the social housing domain, driving a significant portion of the market’s growth. However, the operations of the sector’s leading player, Civitas Social Housing (ticker CSH), have recently faced scrutiny following a short position taken by ShadowFall Capital & Research. This development led to a substantial 30% dip in Civitas’ share value, casting a shadow over the second-largest REIT, Triple Point Social Housing (SOHO), which saw its shares decline by over 15%. This situation not only raises concerns about the sector’s heavy dependence on these funds but also dampens the spirits of investors who anticipated consistent returns from these REITs.


Historically, the primary avenues for capitalising on this market were either by venturing into private landlordship, with its accompanying challenges, or by seeking access to institutional equity focused on social housing.



What is the difference between social housing and supported living?

While both social housing and supported living accommodation fall under the umbrella of housing provisions, they cater to distinct needs and demographics.


Social housing primarily offers affordable homes to individuals or families based on financial or situational needs. Its main objective is to provide a roof over the heads of those who might struggle to secure housing in the private market due to economic constraints or other challenges.


On the other hand, supported living accommodation is tailored for individuals who require additional support alongside their housing. This could be for people with learning difficulties who might need live-in carers or those battling addiction who benefit from added guidance to live autonomously. The rise in its popularity stems from its emphasis on promoting independent living while ensuring optimal care outcomes, positioning it as a preferred alternative to traditional residential care.


What is a registered provider of social housing?

Understanding Registered Providers of Social Housing and the Role of the RSH


The Regulator of Social Housing (RSH) was instituted by The Housing and Regeneration Act 2008. Organisations that register with the RSH to offer social housing services are termed ‘registered providers’. Being registered brings them under the purview of the RSH, requiring them to adhere to specific regulatory criteria. This registration not only subjects them to the oversight of the RSH but also qualifies them for various benefits, including access to funding and grants tailored for social housing.


However, it’s crucial to note that not every entity offering social housing or supported living accommodation is a registered provider. Investors should exercise caution and understand that an RSH registration isn’t an unequivocal guarantee of the provider’s quality or reliability. Instead, it offers a layer of transparency. The RSH, for instance, releases regulatory judgements on each registered provider, evaluating their governance and viability. These judgements occasionally reveal providers that don’t align with the regulatory framework or fail to meet its standards.


Conversely, the absence of RSH registration doesn’t necessarily imply a compromise in the quality of service. Several valid reasons might prompt a social housing provider to function outside the RSH’s regulatory ambit. For smaller entities, the financial burden of registration might be a deterrent.


Furthermore, both registered and non-registered housing providers can operate under various organisational structures. They might function as charities, housing associations, public limited companies, private limited companies, or even a blend of these. Each structure comes with its own set of regulatory guidelines and available public information for evaluation.


Pros and Cons of Social Housing Investments



Secured Income: One of the primary benefits of investing in social housing is the assurance of income. A significant portion of the tenant’s rent, ranging from 30% to 70%, is subsidised by the government, ensuring a consistent revenue stream for investors.

Reduced Vacancies: The high demand for social housing means that these properties are seldom vacant. This consistency reduces the costs associated with empty rentals or tenant turnovers.

Pre-screened Tenants: The government conducts preliminary screenings for all potential tenants in the social housing program. While investors are still advised to conduct their own checks, this initial vetting offers an added layer of security.

No Bank Mortgages: Unlike traditional property investments, social housing investments typically don’t involve mortgages with banks.

Socially Conscious Investment: Beyond the financial gains, investing in social housing contributes positively to society by providing homes for those in need.


Potential Risks:

Funding Changes: While the government’s subsidy offers a level of security, it’s essential to be aware that policies and funding can shift. Staying informed about these changes is crucial to gauge their potential impact on investments.

Facility Standards: Investors need to be familiar with the government’s standards regarding property maintenance and refurbishments. Meeting these standards might influence the overall costs and, subsequently, the returns on investment.

Resale Considerations: Although social housing investments are typically long-term, considering the potential resale value of the property is vital.

Governmental Rental Requirements: Renting out to government-subsidised tenants comes with its own set of rules. Investors should be prepared for governmental inspections, specific lease terms, and potential rent controls that might differ from traditional rental properties.


In Summary

At HMOsales we have been focusing on brokering HMO deals across the UK since 2018. Social property investing in the HMO sector is beginning to hot up with significantly high demand for house share accommodation. We help HMO investors develop new HMOs by purchasing and refurbishing them, but also selling ready made social housing HMOs to HMO investors that want hassle free high yielding HMOs. If you are look for social HMOs deals for sale then please get in touch today.