For many 17 July passed just like any day. It however marked a missed opportunity to make a significant contribution to helping open a new avenue for the funding of much needed social and affordable housing.
For those who missed it, the latest Finance Bill became law on 17th July. Included were provisions for the introduction of Social Investment Tax Relief, a scheme which offers generous tax breaks for individuals looking to lend or invest money in organisations delivering positive social impact. Modelled on the existing Enterprise Investment Scheme tax incentive, SITR has the potential to make a significant impact in supporting the growth of the social investment market, helping increase the supply of money to organisations that often struggle to attract investors.
As with any tax relief, carefully defined scheme rules determine what can or cannot be invested in. Despite calls from Social Finance and others, one activity which is excluded is the provision of finance for affordable or social housing. While there are good arguments to exclude property from mainstream tax reliefs such as the EIS scheme, the arguments for its exclusion under SITR remain less convincing.
By its very nature, affordable or social housing is a sub-market activity. Against an alternative of developing market rental or for sale units, there is a need for some form of subsidy to make the figures stack up. Historically this has come in the form of grant, explicit planning restrictions depressing land values, and to a lesser extent by the implicit government guarantee larger housing associations have enjoyed when accessing debt markets. However with these all under pressure, it is no surprise that many housing associations are rethinking the scale of their development ambitions. A SITR which covered social housing, if properly constructed, had the potential to offer organisations funding at effective costs far below available currently, and in particular help them identify new sources of equity funding. This in turn would have allowed more schemes to stack up financially, helping support the development of new much needed housing.
Don’t get me wrong, SITR would not have been the panacea for the shortage of good quality homes that this country needs, but if appropriately structured it could have helped. As such I can’t help feeling that SITR as it stands feels like a missed opportunity for housing.
By Tim Rothery, Associate Director at Social Finance