In 2017, Andrews Charitable Trust set itself a challenge which would bring to life our 70 year symbiotic relationship with Andrews Property Group. Could we build up a portfolio of houses for use by local youth charities in all of the communities where the business works? There are around 50 communities, so we have set up the [Establish] programme with a target of 50 houses!

Three years in, having bought four houses from reserves, we needed options to leverage our funds. We were keen to explore investment opportunities but knew that the margins would be tight. With support from trustees, we had several attempts to model growth whilst keeping rents affordable for young people embarking on their careers. We had several conversations with mainstream and social investment organisations, including peers from other trusts and foundations. 

To our surprise, feedback was incredibly positive about what we were trying to do, but of little help in guiding us to appropriate social investment. It appeared that this type of initiative, expanding housing options with/for small local charities offering accommodation-based support, did not clearly align with existing social investment products. I approached the wise Daniel Brewer at Resonance to help and, with a small group of other interested organisations – Esmee Fairburn, The Blagrave Trust and Big Society Capital, we commissioned an exploration. 

In 2021, Big Society Capital confidently informed us that there is an increasing amount of capital flowing into residential housing in the UK, helping to address the chronic undersupply of affordable homes, with affordable housing funds estimated at £2.9 billion. But it is frustrating how difficult it is for social investment to support those charities who struggle the most with access to funding. 

Our research focused on housing needs for care leavers and the possible ways to increase the number of suitable housing options that could be supported by social investment. We talked to a range of providers running supported housing, usually funded by local authorities. This commissioned funding commonly does not separate out property from support costs and the mixing up of housing management and support income and expenditure hampers clarity over their business models.

IVAR research (2016) has also suggested that the investment sector does not function as a market with charities under £1m. However, the same paper suggests that for some things – and property mortgages might be one – mainstream financial products provided for small businesses might suffice. A further point is made, however, about the role that social investors can play in helping relatively inexperienced charities to make better strategic decisions. Providing advice on the suitability/feasibility of particular property investments and sharing examples of what worked and what did not.

Most of the housing and support organisations wanted to have access to property over which they have greater control – through leasing models or ownership. Deep-dives into the business models of a handful of charities were conducted with the hope of designing a series of templated solutions for release on an open-sourced basis to the sector. The purpose of this would be to reduce the transaction costs of social investment, providing options not possible in bespoke product development.

We got quite excited by the concept of supporting smaller charities to do their own direct capital raising (say, through approaching their existing donors). However, FCA guidance (rather unfairly in our view) is not sufficiently defined in this area and if this approach was used, would require case by case application, again pushing up costs. Exasperatingly, we had to call it a day without producing anything that could support charities with modest ambitions to grow their property portfolios. However, we still do believe that there’s an opportunity to pursue this further, as part of shaping the social investment raising market to better meet the needs of the smaller housing and support providers. In our view, the FCA guidance that covers housing providers raising funds from their supporters and others, in line with their social enterprise purpose, is insufficiently defined (being targeted at speculative property purchases) and would benefit from further definition and clarification. Andrews Charitable Trust and Resonance are ready to develop that conversation – are there others out there who would join us in this? If so, please get in touch (contact details below).

For our own [Establish] programme, we ended up opting for a loan against an existing asset (we are fortunate to have one) and have doubled our portfolio in one year – but there is so much more to do. We will continue to advocate for young people to have access to a safe and affordable home as the essential bedrock from which they can step out into an independent life. We remain committed to understanding the key blockers that were raised in the final report and to improving the ways that small, local charities can provide person-centred support provided WITH a home.

DOWNLOAD THE REPORT

Siân Edwards
Executive Director
Andrews Charitable Trust
[email protected]

Martin Lawson
Head of Impact & Innovation
Resonance
[email protected]