There is a lot of talk at the political and institutional level about social investment and mobilising alternative sources of capital to help fund, well, pretty much everything. Key Performance Indicators are often touted as an essential tool to facilitate private investment in social housing. While I agree they are indeed an essential tool, other elements are also needed.
By James Thorogood, Social Housing Investment Specialist
Governmental structures have historically mediated the relationship between capital markets and social housing investment but are under pressure to minimise their involvement for various reasons: domestic politics, European Semester, and creative public debt classifications. Public interest banks are making an effort to pick up the slack. But demand is great and the various problems may demand solutions which are not obviously on offer.
Whatever the problem, it seems that the private sector must play a part. Capital providers are of different sizes, mandates, investment strategies and objectives. Whatever they are, they speak the same language: the reporting language to assess investment performance, assessments on which investment decisions are based. For the social housing sector to engage the private, it is necessary to speak the same language as them, to measure performance in a way they can understand, and base decisions on.
While financial reporting is necessary, it’s not enough, for two reasons. Firstly, social housing makes a special, social and environmental contribution in their own countries. They should ensure this performance is accounted for in order to show the ‘inefficiencies’ of social housing as the social dividend which additional costs really represent. The GFC has made public and private actors much more conscious about the impact of investments. Social housing can make a strong and positive contribution to a public and private investment footprint.
Secondly investment must be structured in some way, requiring capacity and expertise to bring the right actors together to make the investment ‘work’. Housing Europe is making a contribution in this regard with a project to better understand the various problems accessing capital (including performance reporting) and good examples of structuring investment involving social housing, private and public sectors, well as innovative ideas from other areas often involving EIB and EIF.
There are undoubtedly many challenging conversations ahead before the walk is indeed walked, and sustainable methods are found that lever in the capital needed to address the different social housing challenges out there. It should be clear that performance reporting frameworks across financial, social, and environmental dimensions will not in themselves solve these problems. But they are a crucial step in the right direction.
* For questions about the housing Europe project feel free to contact James