Published: 9th Jun, 2025
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Social Housing vs. Private Investments: A Comparative Guide for Investors
Deciding whether to make a social housing investment or go the private route is no small decision.
The reality is that there are pros and cons to both. In our experience, social housing investments can be very rewarding long-term as long as they suit your goals, budget, and situation.
Here, we’ll look at both types of property investment and help guide you towards a decision that works for you.
What we’ll cover here
| Consideration | Private investments | Social investments |
|---|---|---|
| Mortgages | Most mortgage lenders ask for a rental cover of 145% for private housing investments. | These are reserved for cash buyers only. |
| Social impact | You can develop a positive relationship with your tenants and provide stable homes for people. | The scope for creating a real social impact in your region is significant, as you can provide quality, affordable housing to vulnerable or low income tenants. |
| Management and maintenance | This is more intensive and hands-on as the responsibility falls on you. You’ll have to manage the regular management and maintenance or pay to outsource it to an agency. | This is a more hands-off venture as typically, the housing associations manage tenants, upkeep, and property maintenance. |
| Leasing details | There are restrictions on rent and sale that you’ll need to navigate. | FRI lease agreements apply. |
| Potential profits | You can make a healthy long-term profit through social housing investment. | You'll usually earn a short-term profit, providing your rent charges cover your mortgage. Rental yield varies depending on region, with a solid yield falling at around 5%. |
| Valuation | Residential valuation examines the composition, region, and socioeconomic factors that make a home livable or desirable. | Commercial valuation focuses on your scheme's ability to provide a base for profit-making businesses. |
| Market scope and demand | The demand for social housing massively outweighs the supply of affordable homes in the UK. | The demand from tenants currently outweighs the supply of rental homes in the UK. |
While both private housing and social housing investments have their share of pros and cons, it’s clear the growing demand for affordable rental housing in the UK right now. Due to the rising cost of living making it harder for young people to gain a foot on the property ladder, more people are renting homes well into their 40s.
That said, with the right type of investment, it’s unlikely that you’ll find a shortage of tenants to occupy your properties. To help guide you to a decision that suits your property investment needs and circumstances, here are the pros and cons of each type of investment.
Private housing investment
Pros
- You can gain a steady income from your rental properties
- Your properties will appreciate in value over time if you look after them
- Private rental yields can be high in certain regions of the country
Cons
- Private tenant turnover can be high and you’ll have to navigate potentially costly void periods
- There’s a lot of red tape and administration to deal with as a private investor or landlord
- You’ll have to take an active role in the management and maintenance of your properties
Social housing investments
Pros
- You’ll likely enjoy a secure and steady return on investment (ROI)
- Full repair and insuring (FRI) lease agreements mean you won’ t be responsible for the protection and the upkeep of your properties
- Your investment will be secure and offer you long-term gains
- You’ll be investing in something that makes a positive social difference in your community
Cons
- Government-backed social housing can be heavily governed by government policy, leaving you little say in how things are run
- You may be a little more limited in terms of investment location
- The legal fees and taxes associated with social housing investments can add up
Private housing investments are usually more tricky to navigate than social housing investing initiatives.
Why? Well, as I explained earlier, private housing investments are more hands-on than government-backed social housing schemes, for example.
To earn success as a private investor, you’ll need a working knowledge of leasing legislation, mortgage loans, tenant and landlord relationships, and practical property management.
What are the rental yields for private housing?
According to official data from Zoopla, the average UK buy-to-let property generates £1,000 in monthly rent.
The average gross private rental yield in the UK is 5.60%. According to the same study by Zoopla, the North-East offers the highest yields which stand at over 8%. That’s pretty impressive. But while £1,000 in monthly rent and healthy rental yields sound good (and they are)—there are certain associated costs and risks to consider.
When weighing up potential private rental profits, you should account for potential void periods and ongoing maintenance costs.
This calculation will help you get a more accurate gauge of your potential rental yields before any additional costs:
Divide your proposed annual rental income by the property value and multiply it by 100.
For instance, if a property is worth £400,000 when you bought it and you plan to charge £2,000 per month in rent, which works out to £24,000 per year, that would give you a yield of 6%.
What other costs do I need to consider?
Once you know your potential rental yield, you should ensure you have a budget for these common annual running costs:
Letting agent fees: £720 to £1,080
Buildings and contents insurance: £150 to £200
Council tax: £1,200 to £3,600 (dependent on band)
Mortgage interest: £1,800 to £2,160
Rental insurance: £200
Regular building maintenance: 5 to 20% of your rental income
It’s also important to consider private landlord costs that come with renting a property to new tenants. These include:
Smoke alarms and heat detectors: £150
Landlord’s gas safety certificate: £60 to £100
Electrical Installation Condition Report (EICR): £300 to £1,000 (the certificate itself is £150, then additional compliance works apply)
Portable Appliance Testing (PAT) Safety: £60
Legionella risk assessment: £60
FYI: According to my personal experience as an investment specialist, the rough cost of purchasing a private investment property is around £36,500 to £40,000.
This takes into account surveys, valuations, legal fees, and mortgage deposit costs. If you’re looking for a prime investment that suits your needs, explore our below market value property options.
Shelter’s Safe as Houses initiative has brought together a mix of influential voices, including Professor John Muellbauer to make a case for government-backed social housing.
The general consensus is that a rise in social housing will result in stronger communities and a more stable UK economy. As a potential property investor, investing in social housing could also offer you a treasure trove of benefits.
As we’ve explored, the right social housing investment is stable, low-risk, and in most cases, far less hands-on than private property investments. We’ve seen a steady rise in social housing investment in recent years, which I believe is underpinned by a pressing need to plug the void between supply and demand.
If you invest in social housing, you’ll be making a positive difference while securing a lucrative investment for yourself.
Social housing schemes are usually backed by the government or housing associations, which essentially act as care providers. That means contractual agreements are generally more favourable than private investments, as maintenance responsibilities typically fall onto the housing association rather than you, the investor.
What are the rental yields for social housing?
Investing in the social housing sector offers an opportunity to make a positive difference while earning slightly higher rental yields than you might with private rentals.
Without regular maintenance and tenant void periods to personally manage, social housing is typically less time-consuming and more stable (in terms of income) than private investments.
Unlike private buy-to-let investments, social housing is based on long-term lease contracts with registered housing providers, offering a hands-free investment opportunity without maintenance or management costs sapping your profits. This is one of the main social housing offers higher yields, which typically sit at the 8% to 10% mark.
It’s also worth noting that as the government has capped social housing rental increases at just over 7%, there’s a level of stability to these government-backed opportunities—the kind that attracts regular investment.
As social housing is in continual demand, you’ll be less at the mercy of constantly fluctuating private rental market changes.
The bottom line? The steady and more regulated nature of social housing makes it a more stable source of income.
Investing in social housing: what you need to know?
A big plus-point for social housing investing is the fact that it comes with fewer fees as the housing association or governing body usually takes care of the day-to-day management.
But, to secure the best social housing investment for your needs and enjoy a healthy long-term return on investment, there are certain things to know or consider. You’ll need to:
Key Steps to Social Housing Investment Success
So, which property investment route should you take? We’ve outlined the potential pros and cons of both avenues and explored the key dynamics of each investment scenario.
While your choice will come down to your personal situation and preferences, it’s worth highlighting that social housing investment:
- Is in rising demand
- Is a far hands-off venture
- Offers the potential of a stable long-term income
- Will result in positive social impact
On the other hand, private rental investments are:
- Plentiful across major UK regions, especially if you look for prime investment opportunities off-market
- Typically offer healthy rental yields. Some regions like the North-East offer potential yields of up to 8%
- Are in steady demand as the need for quality rental homes increases nationwide
- Steadily appreciate in value over time in the majority of cases
Investing according to your preferences and motivations: a quick comparison guide
While there is no definitive answer to the question, “Are private investments or social housing investments better?” weighing up the pros and cons of each scenario will lead you to an informed choice. You should also take the time to be honest about your personal goals and motivations.
With that in mind, here’s a quick ‘motivations comparison guide’ to help you cement your investment decision:
| Consideration | Private investments | Social investments |
|---|---|---|
| Mortgages | Most mortgage lenders ask for a rental cover of 145% for private housing investments. | These are reserved for cash buyers only. |
| Social impact | You can develop a positive relationship with your tenants and provide stable homes for people. | The scope for creating a real social impact in your region is significant, as you can provide quality, affordable housing to vulnerable or low income tenants. |
| Management and maintenance | This is more intensive and hands-on as the responsibility falls on you. You’ll have to manage the regular management and maintenance or pay to outsource it to an agency. | This is a more hands-off venture as typically, the housing associations manage tenants, upkeep, and property maintenance. |
| Leasing details | There are restrictions on rent and sale that you’ll need to navigate. | FRI lease agreements apply. |
| Potential profits | You can make a healthy long-term profit through social housing investment. | You'll usually earn a short-term profit, providing your rent charges cover your mortgage. Rental yield varies depending on region, with a solid yield falling at around 5%. |
| Valuation | Residential valuation examines the composition, region, and socioeconomic factors that make a home livable or desirable. | Commercial valuation focuses on your scheme's ability to provide a base for profit-making businesses. |
| Market scope and demand | The demand for social housing massively outweighs the supply of affordable homes in the UK. | The demand from tenants currently outweighs the supply of rental homes in the UK. |
If you’d like to consider social housing investment and you need guidance, we’re here to help. Our in-house team of property experts will be happy to discuss your investment needs and help to connect you with the opportunities that best suit you.
Your next big property investment awaits.
Yes, there’s a growing demand for affordable housing right now and it will continue to rise. We’re in need of affordable housing up and down the UK. For property investors looking to make a positive social impact and earn a steady rental income, social housing is an ideal investment opportunity.
Yes, rental yields for social housing are typically higher than private but-to-lets and running costs are lower as the housing association or governing body generally takes care of the maintenance and management. As social housing investments are built on long-term contracts, they’re stable and steady. This means you stand to make a healthy and reliable income from the right social housing investments.
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