If you’re considering investing in social housing properties in 2024/25, it’s essential to understand the recent changes in government funding for social housing. This year, the government has announced a significant funding package to boost the development and refurbishment of social housing nationwide. This move aims to address the urgent need for affordable housing and presents a unique set of opportunities and considerations for investors.
The increased government funding for social housing in 2024 is expected to boost the market, making social housing an even more attractive investment option. This translates to a range of potential benefits for investors, including tax incentives, grants, and potentially higher yields than traditional residential properties. Investing in social housing aligns with a growing trend towards ethical investing, where your investment can contribute to societal well-being while generating returns.
What is the Local Government Finance Settlement?
Earlier this February, the UK Government unveiled the £64.7 billion financial package for 2024/25 to boost council budgets. It was announced by the UK’s Levelling Up Secretary, whose goal is to transform communities across the UK into thriving, sustainable places for living and working.
A noteworthy share of the outlined £64 billion, a total of £4.5 billion, is directed toward local councils. This figure surpasses last year’s allocation by 7.5% – a hefty slice above inflation. With this significant financial injection, the local Government is set to maintain the delivery of frontline services without jeopardising budgetary pressures.
£600 million will support local council budgets, particularly those facing financial struggles. Another £500 million is given for social care – a broad umbrella incorporating fostering, caring allowances, and housing for disabled or people in difficult conditions.
Through the Funding Guarantee, the Government ensures a minimum 4% increase in core spending power for all UK councils.
Local councils can now increase council tax by up to 3% without needing local consent, including an additional 2% that could be allocated for adult social care services. The main goal is to protect local taxpayers from the potential burden of council tax increases.
This funding agreement emphasises the need for local councils to be cautious while suggesting increases, especially considering the financial impact on less economically secure families.
How does the settlement affect the social housing sector?
Government funding can stimulate growth and development in the social housing sector. This settlement is to be used to provide local authorities with the funds to enable them to support the local communities, which includes focusing on providing affordable housing for those who need it:
- If a local authority sits in the most deprived area of the UK, it will receive 18% more pre-dwelling than the least deprived areas.
- An additional £1.5 billion has been made available for social care compared to the previous year, which includes ensuring habitable, safe homes are available.
- There has been an increase of £15 million to the Rural Services Delivery Grant, which will rise to £110 million for 2024/25. This is recognising the additional costs that councils face when serving dispersed populations.
- The government will maintain other grant approaches and increase the Revenue Support Grant.
The focus of the increase in funding is to enable the sector to return to a stable state. To do this, it has also been requested that local authorities develop and share their plans for productivity.
| Grant Type | Explanation | Funding Numbers |
| Social Care Grant | Social care funding is there to provide people with help and funds so they can perform their everyday activities and tasks. | £5 billion will be available through the Social Care Grant, a £1.2 billion increase on the previous year, including an additional £500 million of funding. |
| Market Sustainability and Improvement Fund | The fund’s purpose is to support the local authorities in improving services for adult social care in their local areas. | £1.1 billion has been made available through the Market Sustainability and Improvement Fund, an increase of £123 million compared to last year. |
| Discharge Fund | The Discharge Funding Grant provides upper-tier authorities funding to ensure people who need access to social care when they are discharged from the hospital can leave as soon as required and have the funding available for the care needed. | £500 million will be available through the Discharge Fund, a £200 million increase to local authorities. |
| Better Care Fund | The programme supports local systems to integrate health and social care successfully. It also provides sustainability and better outcomes for people who need it and carers who are there to give it. | £2.1 billion has been allocated to the improved Better Care Fund. |
Where possible, the above funding should be used towards the Social Care Grant to invest in the areas that help place children in social care services and safe homes. Investment should be made into expanding family help where possible, which includes safe, affordable and habitable homes.
What is the breakdown of the £64 billion funding package for social housing?
While the breakdown of the £64 billion funding package for social housing varies depending on the specific policies and priorities of the government, it is expected to cover several specific areas.
There has been a 4% increase in social housing construction in the past year, and this much of the funding will likely be allocated to constructing new social housing units. This could include land acquisition costs, planning and design, construction materials and labour, and other related expenses. The aim is to increase the supply of affordable housing, particularly in areas with high housing demand.
The funding package will also likely include substantial investment in renovating and upgrading existing social housing stock. This could involve improvements to energy efficiency, accessibility, and overall living conditions, which benefit current residents and enhance these assets’ long-term value and sustainability.
A portion of the funding may be set aside for supportive services and programs that enhance the quality of life for social housing residents. This could include education, health and wellness initiatives, employment and training, and community development.
Some funding may be used for administrative and operational costs for managing and maintaining social housing properties. This includes staff salaries, maintenance and repair costs, and other overhead expenses.
How will the funding package affect temporary accommodation in the UK?
In anticipation of soaring temporary accommodation costs projected to reach approximately £2 billion by 2023/24, UK councils are welcoming the government’s confirmation of the funding package toward social housing. The spending on temporary housing, which has more than doubled over the past six years, shows an alarming demand due to insufficient social housing availability and high private rental prices. Local councils have faced financial strain and, in some cases, bankruptcy risk.
However, this newly secured £4 billion slice of the funding is slated to help local councils provide adequate accommodation without stretching their budgets to the brink. Ultimately, this move is expected to significantly reduce the number of people housed in temporary accommodation, supporting the government’s commitment to ending rough sleeping by 2024 and fostering healthier communities.
What does this funding package mean for investors?
As an investor, what does this funding package mean for you?
This commitment by the government not only supports the creation of affordable homes but also opens up more ethical investing opportunities.
Investing in social housing is an excellent way to enhance community well-being by offering quality homes to those who need them most. This approach fosters stability in neighbourhoods, propelling economic progress. Investments in social housing aren’t just ethical; they could also prove profitable in the long run due to the continuous need for affordable homes. Aligning your investments with your ethical standards showcases a mix of financial savvy and community consciousness.
Social and affordable housing projects are an emerging area for investment, bringing significant societal impact while offering attractive financial returns. The £64 billion funding supplement confirms the government’s dedication to this sector, and as an investor, this can reduce financial risk, as it provides a level of financial security.
With long-term lease agreements and government backup, social housing is becoming an increasingly stable asset class. The reliable income stream it generates, combined with the inherent societal impact, fortifies it as a sustainable option for your investment strategies.
Invest in Social Housing with Yield Investing
The amount of people who need social housing in the UK is on the rise, and more and more people are living in poor conditions, in temporary housing, or they are taking on privately rented properties that they simply can’t afford. The social housing waitlists are getting longer and longer, with no sign of homelessness or social housing issues within the UK slowing down.
Local councils have been granted additional funding to keep some of them from bankruptcy. They are focused on lowering the number of people put into costly temporary accommodation and increasing the number of people put into safe and habitable social housing homes.
A warm and habitable home is a human need. However, there needs to be better quality low-cost homes in the UK for everyone who needs one, and that solution isn’t temporary accommodation.
Investing in social housing means you’re investing in the long term, and if you’re seeking a high-yield investment, it’s perfect for you. This is a sector of housing that may be unique to investors but one that should be in everyone’s investment portfolio. Not only will you see a high return yield on your investment, but you will also be helping home people who need it within the UK.
If you’re curious to explore social housing investments and how to invest purposefully to benefit society and your investment portfolio, contact our property advisors today to learn more about working with us.
