I had a fabulous call today with a social investor with the objective of increasing home ownership across third sector organisations and, through helping them to acquire capital assets, increasing their sustainability.
This ties in completely with the work I am doing with the London VAWG Consortium. As you might imagine, emergency and follow on housing is a critical factor in helping women move from violent and abusive situations to getting on with their lives.
This social investor has a fund-wide (ie nationwide) view which means that any organisation can purchase houses, regardless of whether they and their beneficiaries are located in high or low house price areas.
The initial loan enables the organisation to purchase the property 100% outright. It will sit on the balance sheet for the duration of the loan, with the social investor holding a charge on the property for the duration of the loan (typically ten years).
The loan also covers legal and renovation costs and can cover the costs of a specialist member of staff to manage the properties. The loan is serviced through surplus income from rents and housing benefit, less the costs of maintaining, servicing and insuring the property.
At the end of the loan period, an independent market valuation is conducted by which time the organisation would have some equity in the property, and would then be able to re-finance the property using conventional mortgage lenders, having established the rental income and a track record of managing housing. Over a further period of time, as the loan is re-paid the organisation would acquire full ownership of the property.
The organisation can also make the choice to hand the keys back at the end of the period - this is a really important benefit. Things change for organisations all the time and what made sense ten years ago may not be the best way for the organisation to fulfil its charitable objects now.
This is a tremendous opportunity for charitable and social impact organisations to acquire a capital asset over time which will contribute to their sustainability. Getting into property ownership can be a daunting prospect for organisations and this opportunity provides a trusted partner in the social investor which will shoulder some of the burden of the business decisions involved. The investor is also targeting comparatively small and medium sized organisations with a turnover of about £500,000pa.
Interestingly, it also provides a critical role for the Consortium as an interpreter and trusted intermediary between member organisations and social investors, able to provide some of the leadership and organisational support essential to making the package work.
It was a great way to start the day and we've nothing but blues skies!