Create a #4thWay for Affordable Homes
The UK's housing market is currently broken. Not enough new affordable homes being built for sale or rent. Home Ownership fast becoming a distant dream for many. The numbers privately renting increasing exponentially while rents and fees are already the highest in Europe. Social housing being sold off.
Where will our children, grandchildren and future generations who will power the UK economy live?
Can any of the existing three ways (home ownership, private or social renting) provide them all with a safe, secure and genuinely affordable place to call home?
We think not.
- Even with a 20% discount through starter homes or Help to Buy, house prices will remain out of reach for many. And home ownership is also not the tenure many younger people are now seeking. Recent extensive surveys highlight well over a third of people actually choosing to rent rather than buy.
- Private Renting is currently a long-term investment, which requires a long-term commitment, and mainly appeals to the individual investor – hence the explosion in Buy to Let. The apparent £30bn of institutional funding being lined up for Build to Rent is into an existing model. Geared towards obtaining the highest returns possible rather than affordability - maximising profit rather than affordability for the millions who need it. Private renting will remain an expensive, uncertain and high-risk option of little choice for many.
- And the current government just doesn't want to invest in social housing. It is seen as part of the problem rather than being a solution, and the Right to Buy is being extended. More social housing is and has been sold than built.
Which is why we want to establish 4Vie - a new social enterprise to deliver a vibrant, modern and ethical fourth way.
The vision is simple. To start a new enterprise which will build, purchase and manage a stock of homes across the UK, with;
Modelled on successful and thriving rental sectors in Europe, and offering what tenants want from a landlord - safe, secure, genuinely affordable and well maintained homes. Including 35% of rents starting at 35% of average local incomes, no upfront fees, and 7-year renewable tenancies.
Aiming to deliver 6,000 additional homes by 2020 for those who are locked out of home ownership; stuck in expensive, insecure and poor quality private renting; or don't qualify for social housing offered by councils or housing associations.
Offering somewhere safe, secure, and affordable to call home. Somewhere to put down roots. For the long or short term. With an added bonus of a share in a % of annual profits for tenants.
Our initial discussions with philanthropic financiers about the 4Vie model indicated there is huge scope and appetite for investment it, but we genuinely believe that 4Vie needs to be crowdsourced and crowdfunded from the ground up to gain traction and prove the appetite and need for it.
There may not be the political will to solve the housing issues or crisis the UK faces, but Crowdfunding offers an opportunity for real democracy in action. Allowing people who support the need for genuinely affordable homes to take action in an area that has previously relied heavily on government support. Enabling us to stop being mere observers of the political whims of whichever government is in power, and to sponsor, decide, choose, create and effect what we want.
And maybe the government’s role in all this should just be to pave the way for social enterprises and entrepreneurs to deliver? The great 19th century philanthropers such as Guinness, Cadbury, Peabody & Rowntree provided inspiration by building affordable homes for their workers. But since World War 2, state subsidies have dominated the funding of our not for profit and charitable sectors. Many of whom have ended up chasing the government money rather then the vision, and become a career path rather than a vocation.
Yet philanthropy is in our culture. Charities Aid Foundation analysis shows that in the UK we gave £10.6bn to charities last year, and British philanthropers (including Elton John & David Beckham!) gave away £2.6bn to social enterprises or charities, while the amount of cash to donate at their disposal stood at £19bn. And there is a staggering £5,929bn of wealth in the UK.
The challenge is to translate this available funding and the success of Crowdfunding elsewhere (estimated to have raised £5bn globally last year – recent examples including $8m for Fishbrain, a ‘Facebook for fishermen’!) into a Viable, Independent and Ethical #4thway for affordable housing.
The benefits are certainly clear.
No politics to get in the way. No bureaucracy. Just good quality, well managed and genuinely affordable homes for the millions of those who need it.
What's in it for you?
What if you can make a real difference and have a meaningful impact? From the person needing an affordable home, to the parents or grandparents of children looking for a home, to the person who has done well from housing themselves and wants to help others get on the ladder, through to the person or organisation who recognise the housing issues faced by many and just want to make a difference, there's something in 4Vie for everyone.
And do we all not have a responsibility?
4Vie can't promise a home for everyone. But it can;
- help to meet the aspirations of thousands of those who yearn for a place to call home on a long or short term basis, and
- offer a genuinely meaningful and purposeful home for donations, investments and support.
Every £ will contribute towards delivering a more ethical basis for renting homes than the 'highest return possible' approach being delivered via buy to let crowdfunders or institutional investment companies.
What will the funds be used for?
The initial £100k sought will be used to help fund set up costs. Paying for the time, effort, negotiations, legal fees and other costs needed to obtain the £bn's to invest in the model. For example, the Government's £3.5bn PRS Guarantee Scheme (see section below) is a potential source, but comes with £000's of upfront fees to even get through the door.
£100k will get 4Vie up & running and pay for the staff and fees to help achieve the vision of investing £1bn to deliver 6,000 homes over the next 5 years.
Set up costs will also enable progress towards achieving the best legal status for 4Vie. While 4Vie will always intend to operate on social enterprise principles (reinvesting proceeds back into more homes rather than shareholders pockets) and firmly aspire towards some form of mutual ownership (either for investors or tenants), the final legal structure of the company will be whichever allows delivery of the principles set out by obtaining as much capital to invest in genuinely affordable rented homes.
What if the campaign exceeds the target?
Thank You! 4Vie will have greater leverage and a better seat at the table with the philanthropers and financiers..!
And enter into the second phase of the campaign - offering long term investments with 3% returns for those willing to fund the homes people need.
Will it work?
4Vie's business plan has been modelled and stress tested extensively based on an intial £100m of loan financing, and the finances stack up – delivering a healthy rate of return for any longer term equity investors, and cash to reinvest back into the business to grow, as outlined below.
And with a combined 60 years plus experience of working at executive operational and strategic levels in the private and social rented sectors from those behind it, you can be assured of 4Vie's professional expertise.
The only reason others can’t or aren’t doing it is either because they want more of a return (the private sector), or their operating costs are too expensive (the social sector).
4Vie will be able to deliver. Largely through utlising and emulating the technology being used and the customer service ethos of the likes, for example, of Aldi and Amazon.
Aside from the immediate benefits of providing genuinely affordable, long term rented homes which are available to all modelled on successful European approaches, there are others such as:
- Savills have recently highlighted that the overall capacity to build more of the homes needed (both rental and for sale) will be significantly increased if a wider mix of developers and providers is encouraged. Having significant finance and the will to build in place will not only encourage more local companies back into the market, but speed up overall house building. 60% of all current house building is undertaken by just 11 companies!
- If (as hoped) this campaign not only generates significant interest and funds from individuals but from larger philanthropers or businesses, the knock on effects of a successful 4Vie campiagn could see similar models emerging (potentially to support self build and more specialist models of rented homes) and more genuinely affordable, secure rented homes in general.
So why is the project needed?
How the UK’s housing market is broken & WHY a fourth way is needed
Home Ownership is fast becoming a distant dream for many under 35’s, with average salary to price ratio’s approaching 1:10 for single people, and 1:6 for couples.
As a result, the numbers privately renting in England & Wales have increased exponentially in recent years.
“The evidence so far suggests that these may well turn out to be permanent differences between generations,” the Institute for Fiscal Studies said earlier in 2015.
Savills predicts that between 2014 and 2019 the number of households privately renting will increase still further by 1.2 million (to 6 million), owner-occupiers will fall by 200,000 and social renters will fall by 50,000.
Average private rents in the UK are already the highest in Europe, and instead of saving deposits for a mortgage, a whole generation now have to fund estate agents fees, and deposits - as much as £5k up front payments to ‘secure’ a 6 to 12 month tenancy, and then they might not get their deposit back.
And surveys show that what matter most to existing Private Rented Sector tenants is affordability.
The Current Models Can't fix it
While the government plan to fund more starter homes to buy, even with a 20% discount prices will remain out of reach for many. And the government are intent on pushing home ownership as the preferred solution to the country's housing problems.
Which leaves a potential vacuum for a whole lost generation of the population which may cost the economy and society dearly.
Housing and homes for workers are part of our infrastructure. That’s what inspired the original great philanthropists such as Guinness, Cadbury, Peabody & Rowntree. Infrastructure makes the economy more efficient, lowers costs, helps it grow and makes the whole country more competitive.
Where will our children and our future generations who will power the economy live?
The current private rented sector (PRS) is unable to attract institutional investment on a large enough scale in residential property because while capital growth can be high, revenue returns are lower than can be obtained elsewhere. It is currently a long-term investment which requires a long-term commitment, and mainly appeals to the individual investor – hence the explosion in Buy to Let.
The government has responded to the 2012 Montague Review of Institutional Investment in the PRS by setting up a £3.5bn PRS Guarantee Scheme, which guarantees investment through 30 year government backed bonds. This is likely to be extended to £7bn. Meanwhile Savills have estimated a collective institutional investment ‘ambition’ to invest £30bn in the PRS in coming years. But this is into an exiting model. Geared towards obtaining the highest returns possible rather than affordability - maximising profit and minimising affordability and security of tenure for the millions who need it.
The social housing sector (councils and housing associations) are largely constrained by the politics of local and central government regulation.
Anything they might build or manage for rent is exposed to political whim to sell under the Right to Buy. In the recent budget, it was also announed their rents will fall by 1% a year - leading to even less capacity to build new homes. Their existing operating costs are also higher than could be achieved – largely due to a traditional approach to management & maintenance.
With the imminent extension of Right to Buy to around 1m more Housing Association tenants, and a clear message that social housing is not the solution from government (confirmed in the budget and their 'Fixing the Foundations' strategy), the social housing sector’s future in terms of genuinely affordable rents is not an expansive one, much as it hasn’t been in recent years.
It will become an even more residual safety net for those deemed vulnerable enough to qualify for it, leaving the millions currently on waiting lists with little hope.
All three current existing models of housing provision are unsustainable.
Home ownership is not just increasingly out of reach, but is also not the tenure many younger people are now seeking. Recent extensive surveys highlight well over a third of people actually choosing to rent rather than buy.
And the vast majority of landlords and estate agents in the PRS want to maximise the profit from rent. Press headlines and reality TV programmes increasingly outlining the £bn’s going into private landlords and estate agents pockets, and examples of poor management or maintenance. It's an expensive, uncertain and high risk option of little choice for many, and doesn't need to be.
Meanwhile the current government just doesn't want to invest in social housing. It is seen as part of the problem rather than being a solution.
But there is a fourth way
A Viable, Independent, & Ethical solution. And you can be help to make it a reality by pledging your support.
If you have any queries or comments on the project, please do use the 'send message' button below, message or follow us on twitter (@4VieUk) or message/like us on Facebook (https://www.facebook.com/4VieUK)
We will publish a Frequently Asked Questions page as the campaign progresses.