ARE SOCIAL HOUSING ASSOCIATIONS & INVESTMENTS GOVERNMENT-BACKED?

In this article, we look at what housing associations are, why that may matter for you as an investor as well as the importance of choosing the right one and the benefits of a government-backed property investment.

If that all sounds of interest, then keep reading!

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WHAT ARE HOUSING ASSOCIATIONS?

Housing associations are an important part of the UK housing industry, they play a major part of the overall sector providing affordable housing to millions of people across the country.

There are hundreds of different associations, which mostly operate as non-profit organisations, you can find a full list of providers on the Government website. As a collective, they are responsible for housing over six million people across England alone, with the foundations being offering good quality homes to anyone vulnerable in need, including low income families, domestic violence refugees, asylum seekers and so many more.

Majority of these associations are not private, and reinvest their profits into developing and obtaining more housing to help ease the strain on the crisis.

WHY DOES THAT MATTER FOR INVESTORS?

Despite the extensive list of housing providers, the Government are struggling, there is a continuingly compounding housing crisis and very few houses to ease the pain – despite their best efforts in recent years with various incentives and that’s exactly where you, the investor come in.

As a property investor, this issue represents an opportunity to help these housing associations, providing properties in return for a long-term, high-yielding and socially responsible investment opportunity. Many of these housing associations are offering leases for properties that meet the specific required criteria, although this can be quite complex, which is where we can help, but more on that later!

CHOOSING THE RIGHT HOUSING ASSOCIATION (LEASE) MATTERS!

As you may have seen in the list we provided earlier, there are a lot of housing associations across the UK, and these will essentially be the companies that guarantee the lease for the duration. One of the significantly appealing aspects of this type of investment is their long term, stable nature, they are essentially insulated from the standard property market fluctuations due to the rent being fixed.

For us as a company, we generally only deal with reputable larger firms like those within the FTSE250 to protect and insulate the lease with that extra security of knowing it backed by a financially stable firm.

Most standard properties don’t meet the requirements for these leases, it involves jumping through a lot of hoops and requires a lot of building work in order to get it up to the required standard. A large part of preparing a property is ensuring that the regulation is met, and placing a property with a larger reputable company provides that extra security that everything is completely water tight on the properties that we provide and they are completely up to standard, allowing for an investment opportunity that you can really trust is completed properly and to the highest standard.

CONSIDERATIONS OF A GOVERNMENT BACKED HOUSING PROVIDER

The Government and their policies are directly linked with the viability and offering of housing associations, and in turn what opportunities they can provide private investors. If you are looking to get involved in investing in social housing then understanding these policies and what may affect them is essential.

Long Term Guaranteed Returns

The leases at this point in time range in years which can be anywhere from 5 to 20 years, and at the moment there is a consistent demand for affordable housing, and it only looks to be on the increase. If you obtain a property with one of these leases in place then you will have a rental guarantee for the duration, but you need to be mindful that although at this moment it looks likely there could be an extension after the duration, there is no guarantee and policy can change.

Regulation & Standards

The Government play a significant role in shaping the offering of the housing associations, which of course means the opportunity for investors is completely at the mercy of the funding and support provided by that particular Government at the time. There are various grants and subsidies in place currently, but these can always change and flex based on the market demand, the housing associations performance, and the stability of the government support at that time.

Another thing that you as an investor need to be aware of is that having these Government backed leases, it ensures that the housing associations are regulated when it comes to the standards that they provide mainly reflective of the care of the tenants and maintenance of the property itself, which again makes it appealing for investors with the reduced operational costs.

Policy Changes

We’ve hinted at it in our two previous points, but as an investor if you are interested in getting involved in building a portfolio from some of these social housing investment opportunities then you need to keep a close eye on any potential policy changes. Staying in tune with anything the government release that could affect housing is imperative, it can also be affected by general economic factors of the country.

BENEFITS OF A GOVERNMENT BACKED HOUSING PROVIDER

Housing associations are government-backed, they have to abide by their regulations and standards. The two are intertwined.

Having government-backed support provides that extra layer of safety for you as an investor. It’s not like your standard buy to let, these opportunities come with a lot more reliability which of course can vary depending on the providing association, which we spoke about earlier.

There are a few core benefits to highlight that come with this type of investment:

Tenants

Let’s face it, being a buy-to-let landlord, unless you’re one of the lucky ones, tenants can be one of the issues. This option takes care of all that for you, they select the tenants, manage them and handle any potential issues.

No Void Periods

You will not be responsible for placing the tenants, and the rental amount specified in the lease contract is exactly what you will get, regardless whether the property is fully occupied or not. Void periods can cause significant loss of revenue, but with these contracts, that’s no longer an issue.

Hassle-Free & Repairing

When we say these opportunities are completely hands off and hassle free, they are. The housing association will be responsible for the HMO management, including the repairs and maintenance and ensuring any licences or certifications are kept up to date. All administrative work is also taken care of, as you are not responsible for the bills, like council tax or utilities.

Minimal Financial Risk

Of course every investment comes with a financial risk, you’re having to put money in to purchase the property. As far the risk when you own the property however, it’s extremely minimal, as your monthly rent is completely guaranteed upon handing over the property, you also don’t have any of the stress of rent areas, voids or debt collection due to the points mentioned above.

Property Upkeep

You may be aware of just how much of your profit can be soaked up by the upkeep of a property, but worry no more. There are regular property inspections by the housing association to ensure that the property is kept up to their high standards, regulation and everything is maintained to ensure this.

HMO Licence

The property will come with a HMO licence in place, which will be attached to the property should you choose or not be offered an extension to the lease at the end of the term for example.

WHY CHOOSE THE PROPERTY SOURCING COMPANY

For investors these government-backed social housing opportunities offer a fantastic way to get guaranteed returns, over a long period of time, whilst also helping to ease a significant housing crisis issue for the UK government.

There’s a slight problem though, it’s not easy to do. These properties need to meet very specific criteria and require a lot of works to ensure they meet specific regulations, they are time consuming and expensive to get to the point of being a good investment package.

When you choose to invest with The Property Sourcing Company we do all the hard work for you, from finding the property to ensuring the lease is fully in place before we then offer it to you, the investor.

And speaking in general, our specific offering includes:

· Long Term Stability – Our investment opportunities are backed by a FTSE250 company with a 7-year lease, which is secure and will often be renewed.

· Elevated Rates – If you research online you can often find rates that housing associations will offer, but we have managed to negotiate an elevated rate in order to ensure that the yields are higher than what you can typically find, due to the amount of properties we are able to provide.

· Positive Social Impact – This is true of most, if not all, social housing investments, but it can’t be underplayed the significant positive social impact you are having by housing vulnerable individuals.

· Long Term Capital Growth Potential – Being partnered with a property buying company, these property opportunities that we place with the government backed leases are extremely well researched as we buy and hold some of them ourselves and one of the things we generally look at is whether the area has strong capital growth potential.

So if you want to invest in success, invest with us!

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