Why for-profit social housing might be the uneasy answer to deliver the homes Britain needs

Who owns social housing in the UK? Most likely, your mind jumps to ‘the council’, or ‘a housing association.’ This is correct, and the way it’s been for a long time. However, things are changing.   

Local authorities and housing associations are not-for-profit, re-investing their surplus cash from rents into services or using it to pay down debt. But social housing now includes another type of landlord. For profit registered providers (FPRPs) provide social and affordable housing and distribute the profits they make from it to shareholders or investors.    

Regulator of Social Housing data shows the number of FPRPs tripled over the past decade. Estate agents Knight Frank estimates their collective housing portfolios will treble to 86,000 UK homes by 2028.   

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Investors are attracted to FPRPs by the promise of assets that provide social impact as well as profit. Pension funds in particular are like social housing, as it provides the low-risk, long-term returns they seek (In England, 62% of social renters have been in their homes more than 10 years). Other backers include multi-billion-dollar asset managers such as US giant Blackstone and insurance companies, down to much smaller, more speculative investors.   

Social security  

I grew up in not-for-profit social housing from the age of seven until I was 18, when I left for university. I benefitted from it hugely. If I know one thing, it’s that children crave security. The knowledge that my family couldn’t quickly be evicted at a landlord’s whim – secure tenancies are a defining feature of traditional social housing – was a vital source of comfort and safety. The rent was stable, with regulated rent increases. My family and the home we lived in didn’t feel like assets to be bought and sold.   

So that’s my history and experience, which might explain why I feel a bit icky about social housing being offered as a private market investment opportunity. And confused – social housing owned for profit seems like an oxymoron.   

Arguably, there isn’t room for such thoughts and feelings in a housing crisis. Given the state we’re in – what housing secretary Angela Rayner has called a “national scandal” – does it really matter how social housing is funded, or who owns it?   

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First things first: private investment into public housing is nothing new. At the dawn of modern social housing in the Victorian era, ‘5% philanthropy’ schemes financed the clearance of slums and replaced them with social housing developments, with investors guaranteed a capped 5% return.   

In the current day, private finance is heavily used by not-for-profit social housing providers, usually in the form of loans to build and maintain properties and to keep their businesses running.    

It wasn’t always this way. From the 1950s and for decades afterwards, public housing was largely state funded. As housing historian John Boughton, author of UK social housing history book Municipal Dreams explains: “We had a successful funding model back then, of low-cost, long-term loans from the public works loan board. Repayments and interest were covered by rental income. In due course, the loans were paid back and the housing became income generating.”   

A lost public funding model   

This postwar period was the heyday of British social housing. Between 1945 and 1981, five million council homes had been built. By 1979, 42% of the population lived in council-owned homes.    

Many reasons explain why this state-funded model died. Thatcher’s 1980s government set the stage, by transferring state funding away from social housebuilding to subsidising home ownership through Right to Buy. This reinforced home ownership as a status symbol, stigmatising, stripping back and defunding public housing in the process. This led to ‘residualisation’, where social housing becomes only for those in the worst circumstances, widening the gap between social tenants and the rest of the community.  

Government funding for social housebuilding has fallen ever since. Meanwhile, construction and materials costs have skyrocketed since the pandemic, and there is a shortfall of 152,000 skilled construction workers needed to meet Labour’s housebuilding plans, according to the Construction Industry Training Board.  

Which brings us to today’s dire social housing deficit, and the offer of help via private investment. We simply don’t have enough good-quality, affordable, safe, sustainable homes for rent in the UK. There were 1.29 million households on a waiting list for a social home in 2023, according to government stats. As of September 2024, charity Crisis puts this figure at 1.5 million. As Big Issue reported, there are 151,630 children in the UK living in temporary accommodation – from hostels to B&Bs to HMOs (houses in multiple occupation).   

So what will FPRPs provide to help resolve this? Boughton raises a key question. “Will they actually provide social rents? Or will they be ‘affordable’?”   

FPRPs often use the phrases ‘social’ and ‘affordable’ housing interchangeably, but they mean very different things. It remains to be seen how much of the housing stock FPRPs build or buy will be for social rent, and how much will be ‘affordable’ – a term which is not defined in legislation, is around 20% less than market rents, and includes shared ownership.    

There are also question marks over how tenants’ rights and contracts will be protected if FPRPs sell their houses on, and how Right to Buy would work under the model (a problem that might be best left unsolved, given how it has hollowed out UK social housing stock).    

Boughton suggests issues could be brokered by government intervention. “It’s all about regulation,” he says. “The state public housing model we have in the UK is pretty unusual. If you look at Switzerland and Germany for example, there’s a variety of housing associations, third sector housing providers and a relatively successful private rental sector. That is due to regulation and [rent] control.”   

Time to ask tough questions  

FPRPs may be part of the UK’s housing crisis solution, but now, at these early stages, is the time to ask tough questions of this emerging breed of social landlord, not later. How do they plan to own, manage and maintain their homes for the long term? How will they protect tenants’ rights to stay in a safe, secure home they can afford, should they decide to sell up? How will they intersect with and impact not-for profit housing providers? “Getting down and dirty into the detail”, Boughton says, will be key.  Can profit be balanced with principles? It’s the defining question of the ‘social impact’ investment era. For-profit housing providers must hold themselves to high standards, and consistently follow through on them, if they are to win trust and respect, and make a true impact on society, not just one that sounds good on paper.    

Read more by Olivia Gagan.

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