Social housing investment involves acquiring properties designated for social housing purposes. These properties cater to individuals or families in need of affordable accommodation, typically provided by housing associations or local authorities. Generally the landlord will have a commercial lease setup with a housing provider for them to rent the property. The housing provider then has an agreement with the local authority to provide accommodation for a number of people.
What is the Difference between Social Housing and Supported Living?
Supported living primarily caters to vulnerable individuals, while social housing is focused on providing housing for low-income households/homeless. The primary purpose of social housing is to ensure that those with limited financial means have access to homes.
Why is Social Housing Ideal for Certain Investors?
Investing in social housing offers several enticing benefits for investors:
Societal Impact:
Investing in social housing allows investors to contribute positively to society by providing
affordable housing solutions to those in need.
A Steady Income:
Rental income from social housing properties is often stable and reliable, due to the nature of the lease between the landlord and the housing provider.
Outsourced Property Management:
Housing associations or local authorities typically handle property management. They manage the maintenance, repairs, and the tenants, reducing both the emotional and financial burden on investors.
Attractive Returns:
Social housing can give lower rental yields compared to traditional buy-to-let properties, however when you look at the whole picture it can offer attractive returns when factor in the cost of rental voids and repairs, which can be mitigated by having a strong lease agreement in place.
Is Social Housing Profitable?
Yes, investing in social housing in the UK can be profitable, driven by overwhelming demand
and inadequate supply in the market. For instance, recent data from the UK Government shows that there were 1.29 million households on local authority waiting lists at 31 March 2023 due to the scarcity of available properties.
This demand has steadily increased over the years, exacerbating the housing crisis. The country has also experienced a significant loss of affordable social homes in the past decade, further widening the supply-demand gap.
What are the Disadvantages of Social Housing Investing?
While social housing investment presents promising opportunities, it also comes with its share of challenges:
Restricted Location Choice:
Social housing investments are often restricted to specific geographic areas, where the need for housing of vulnerable people is greatest. These are not always the most desirable areas.
Stagnant Property Value:
Social housing properties may experience slower capital appreciation compared to other
property types, due to their location and property type.
Read The Small Print:
Investors may have limited control over rental prices and property management. There may also be additional fees that you have not been made aware of such as Admin Fees, Renewal Fees, or Exit Fees. These issues won’t affect all investors, but it is something to consider. We would always recommend to have a solicitor to review your lease prior to signing.
Start Investing In Social Housing
Social housing property investment offers a compelling blend of financial returns and societal
impact. While it may come with its share of challenges, the growing demand for affordable
housing and stable rental income make it an attractive option for investors seeking long-term, sustainable returns. If you’re ready to take the next step in social housing investment, contact our team.
