Rethinking housing and social value

By Matt Leach - on 03/04/2013

HACT's Chief Executive Matt Leach demonstrates that social value will soon become a crucial part of the business and housing providers need to make sure they are ready for it.

Last month, HACT published research on the social value of housing.  It’s a bit on the academic side, but for those willing to engage with the metrics coming out of the maths, well worth a read.  It represents the first attempt to apply emerging methodologies around Wellbeing Valuation to the housing sector – an approach increasingly gaining traction in the health,  education and other fields of social policy.

The sponsor, Legal & General, came to HACT looking for help in assessing the social value that they believed would be generated by their developing portfolio of investments in the housing association sector.  In addition to more conventional financial returns, L&G were seeking evidence of an additional social bottom line from that investment.  They were, perhaps, surprised at the extent to which housing providers were unable to provide evidence they had assumed would be commonplace about the social value created by new and better homes.

Providing people with good quality homes generates social value; it is beyond argument.  But maybe because of this, as a sector we’ve taken that assumption for granted, and not done as much as we might have to actively substantiate and evidence what that value actually is, and the ways in which it is delivered.

The hard truth is that social value and social impact has historically been seen by housing providers in context of SROI reports on community investment, and not in relation to the impact and effectiveness of housing providers’ core business.   This is not particularly surprising, until very recently, success measures for housing providers have been externally rather than internally defined, and as a consequence dominated by regulator-driven obsessions with process-orientated value for money comparators and compliance-based tick-boxing.  Whilst the origins of the housing association movement are rooted in its own distinctive social mission and values, from the early 1970s, it is arguable that it has been the state that has shaped organisational cultures and influenced performance targets.

But the result of that artificial division between community investment and broader business priorities has been that the level of social impact measurement that has taken place in the housing sector has tended to produce numbers that are – however accurate in their assessment of value generated through community investment - essentially abstract and lacking in meaningful organisational context.  Put bluntly, if you don’t know the social value generated by the homes you provide, how can you tell if the return on funds invested in community activities represents – in comparative terms - a good return or a mediocre one?  As pressure on resources available to communities becomes tighter, that’s going to become a more important question for residents, Boards and executive teams.

Going forward, in particular for housing providers with significant community focused activities or looking to diversify their businesses, decisions around assets, investment and expenditure are increasingly going to have to take into account the sorts of conversations about social value that were historically owned by the “softer” parts of the business.

This coming together of financial and social imperatives – bringing community investment in from “nice to do” to “essential to engage with” - is already growing in importance.  A good example of this is around benefit reforms.  Welfare reforms upend conventional thinking about business models and in particular risk.   This is not about specifics – whether it’s bedroom tax or universal credit – however ill-targeted or unpredictable their impact.  Rather, I would suggest that more importantly is the extent to which the last 3-4 years has ripped away assumptions around welfare that have underpinned 20-30 years of business fundamentals for housing providers.

We can no longer assume in relation to welfare benefits that the previously unthinkable will not be first thought and then happen, particularly in the context of the biggest ongoing crisis in public finances ever seen.
 We do not know, and cannot predict with certainty what governments (of either party) will do next when it comes to rent regimes, benefit levels or distribution arrangements.

This is important, because for a long time one of the unspoken realities of social housing as a business was that relatively predictable benefits and direct payment to landlords meant that the more welfare dependent your tenants, the more secure the cashflow was against which you borrowed.  So whilst tackling worklessness was always the right thing to do, it wasn’t necessarily a business fundamental.

But this has now all been up-ended. Jobless tenants are an ever bigger risk - because who knows what will happen next in terms of government welfare policy.
What this means is that community investment in tackling worklessness has moved from being a “nice to have” or an “ethos driven activity” to a practical necessity when it comes to de-risking your business.  And in doing so, it fundamentally shifts the division between activities that were previously something the communities team did with a bit of spare surplus and the core of housing associations’ businesses.

That means that for housing providers, community development, bricks and mortar development and financial management will increasingly come closer together.  And it will become increasingly important for all parts of businesses to participate in discussions about investment and value creation using the same terms and currency.

As the Public Services (Social Value) Act) picks up momentum, a greater sophistication in understanding the ways in which housing providers’ businesses impact on a locality, from the provision of housing to procurement to employment to community investment will also go from “nice to have” to “important to get right”. And as the state retreats, driven by financial and demographic pressures, the housing providers who will deliver most effectively for their communities and deliver on their missions and values will be those who can successfully make those links, and as a consequence maximize the value – financial and social - they generate from the resources at their disposal.

Matt Leach is Chief Executive of HACT.  HACT during 2013-14 HACT will be taking forward further research on the social value of housing; leading work on the housing sector’s response to the Public Services (Social Value) Act; continuing to develop its #opendata tool; and developing a range of tools to enable housing providers to better model and evidence their social impact on communities.

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