We see the impact of our work within our communities every day, and we know we generate high amounts of social value.
But as well as helping residents into work or better work, our homes themselves create social value for the resident, in terms of greater disposable income. This can help boost local economies and ultimately provide savings for government in a reduced Housing Benefit bill.
One way we capture this value is by measuring the gap between our rents and the market.
We call this gap the sub-market social value of our homes.
For those in receipt of Housing Benefit we calculate the difference between the relevant Local Housing Allowance (LHA) rate for their home and their actual rent.
The results are impressive. Last year, Sovereign’s sub-market social value was £146m. This means that £82.7m was available as extra cash in our residents’ pockets, for them to spend in local economies. The remaining £58m of social value was saved from households claiming Housing Benefit – a direct saving to the public purse.
This year we’ve seen an increase of over £6m in the sub-market social value our homes have achieved.
As well as a rising market, this increase is due to the 230 new social rent homes we built last year, the on-going 1% per year rent cut and our long-standing commitment to protecting our social rented homes from conversion to higher rents on re-let.
Understanding how values change across our geography – and over time – is an important tool to help shape our strategic choices about development and asset management. Measuring the sub-market social value can help us understand the value which can be delivered by developing different tenures in different areas.
This map shows the variance between our weekly rents and market rents in our operating area. We can see that there are bigger variances in the east of our operating area where market rent levels are much higher.
For example, an affordable home in an expensive market, such as Wokingham, Berkshire, would deliver the same amount of sub-market social value as three homes in Plymouth, where rents and prices are lower.
It was great to see government confirming the £1.67bn investment deal to build 23,000 new homes last week, which includes 12,500 social rent homes in high cost areas. This will undoubtedly deliver significant sub-market social value.
The challenge is, of course, to strike the right balance – do you build fewer affordable homes in high cost areas, or far more in lower value areas?
If the government were to measure and prioritise the sub-market social value of the homes it invests in, it may well consider making even more money available for affordable homes in the areas where they’re needed most. This would maximise the benefit of their investment for residents, communities and, of course, bring down the Benefit Bill too.
We need to make sure we are building the right homes in the right places. While all affordable homes generate social value, those available for social rent in areas where housing affordability is most constrained, deliver the greatest value.