Housing associations unveil £3m investment fund

Four of the UK’s largest housing associations have created a new investment fund to help social enterprises and charities to grow and further benefit their local communities.

The fund has £3m available until 2021 – with ambitions to grow that pot in future – and investors are keen to help organisations to access their own supply chains, worth a combined £2bn a year.

The Community Impact Partnership, structured as a community interest company owned by Clarion Housing Group, L&Q, Orbit and Peabody, will offer blends of unsecured loans and grants worth between £25,000 and £150,000 to charitable organisations, social enterprises and community businesses. The initial £3m comes from the Big Lottery Fund and Big Society Capital, via the Growth Fund at Access – the Foundation for Social Investment.

Loans will be offered with a maximum 5-year repayment period, flexible terms (including initial capital repayment holidays) and 7% interest on average. The fund is looking to invest in organisations that help make communities more resilient, boost access to services and opportunities, or strengthen the local economy. Investees should be in areas served by the four partners (mostly London, the Midlands, and the East and South East of England), but can be at all stages from start-up onwards.

Housing associations are independent, non-profit companies that provide affordable homes for people who need them. They vary in size (from a handful of homes to more than 50,000), but combined provide about two million homes across England, either rented at affordable rates or sold through low-cost ownership schemes. Some also offer support for vulnerable people and/or are involved in community initiatives such as employment training, regeneration and youth projects. Read more at the National Housing Federation.

The four housing associations already invest a combined £30m each year into communities, through grants and delivery of training and other support. The Community Impact Partnership will allow them to offer a new form of finance which can be longer-term than grant funding and more of an “enabler”, said Sam Scharf, head of community investment at Orbit, speaking at the partnership launch in London on Wednesday (pictured above). Grant funding “doesn’t necessarily provide the same motivations” as investment, he added, or the “right runway” for business to grow.

But the “really exciting thing” about the new fund, according to Simon Meldrum, who chairs the investment committee, is the opportunity for ambitious businesses to take a larger slice of the public contracting pie.

Seventy percent of social enterprises say the process of bidding for public contracts is too expensive, time-consuming and complex, according to NCVO research published in 2013. 

Housing associations offer potential business opportunities to deliver small to medium-sized service contracts in areas like cleaning, catering and grounds maintenance, said Beth Pilgrim, co-founder at Supply Change, which was commissioned by Orbit to research the barriers to accessing housing association contracts.

Supply Change found that needs were complex and about much more than money, but Scharf said the four housing associations are already active in or “can deliver” on many of the areas identified, such as mentoring, access to networks or capacity building. Peabody, for example, works with Hatch Enterprise to incubate and support businesses in south London. 

Community Impact Partnership’s first investee is employability enterprise Work People (formerly Hastings Works). David Hinton, founder and managing director, said the deal was attractive partly because of the relatively patient 5-year repayment term and slightly better interest rates than a previous loan he secured. But another factor is the opportunity for growth. Currently only “a very small percentage” of Work People’s customers are from the public or third sector, said Hinton, even though “we know they’re spending loads of money on recruitment agencies… so the supply chain project is really exciting”.

Work People will get £107,000 (around two-thirds loan and one-third grant) to help develop the business with a view to replicating. “[Our] model works really well but I don’t know why”, said Hinton. “We need to understand what’s working, why it’s working and how we make sure it works every time we do it.” The capital will be used particularly for management capacity, digital and data analytics.