A Guide to Social Housing

Social housing investing is a scam!

Well, maybe, in some cases.

There have been some shocking instances lately of companies taking their clients’ money to invest in large social schemes, which haven’t happened, and then going bust. And, unfortunately, the investor (AKA the client) loses everything.

Why? Because they had no security. They were effectively lending money for investment with very high promised returns, but owned no assets to fall back on. Lesson: high reward = high risk.

So how can you help people in need whilst protecting yourself?

Buy your own property and lease it to a housing association (HA). Guaranteed rent, no management costs and minimal maintenance. If done correctly, it can be a low-risk strategy, and if you want to stop, you still have a property to sell or let privately.

But why would you want to?

It’s a no-brainer: you get guaranteed income, minimal outgoings, and the HA will return the property in the same condition—allowing for fair wear and tear—if you ever want it back.

I’ve been investing in the social housing strategy for just under 10 years now, and I can say from personal experience that if you get it right, it can make a fantastic wealth-building vehicle. This is my advice on how you can get started with social housing, including understanding which properties work, the risks involved and how you can find a provider to work with.

The Age-Old Myth: Social Housing Tenants Are Difficult

Like any tenants, there are good and bad. However, with social housing, the day-to-day tenant management typically isn’t your concern. There are three levels of social housing:

• Basic – This refers to the old Department of Social Security (DSS) tenant, now known as someone on Universal Credit (UC), receiving benefits from the Department for Work and Pensions (DWP). They rent your property as a private tenant and are responsible for paying the rent themselves. In some cases, such as a history of non-payment, you can apply to have the rent paid directly to you. However, in terms of rent collection, arrears, voids, and maintenance, this is no different from letting to a private tenant, and you’ll likely still need a letting agent to manage it.
• Intermediate – This is where we operate. It typically involves single-let houses for families or houses in multiple occupation (HMOs) for individuals. These properties can be used for emergency or long-term accommodation. The HA usually provides a three-to-five-year lease and takes responsibility for managing the property and tenants, so you don’t pay management fees. They cover most maintenance and all tenant damage. Your rent is guaranteed, and they can change tenants without informing you, as long as the risk profile remains the same.
• High level – This refers to supported living, where tenants require a greater level of care and support. Leases can be longer, sometimes 10 to 25 years, depending on the provider and the property. These arrangements often require additional facilities, such as improved accessibility and specialist equipment for disabilities, a room for a live-in carer, enhanced security (e.g. alarms and cameras), and sometimes a location away from amenities like pubs or schools, depending on the tenant profile. Due to the higher entry costs, the rents are typically much higher.

The Varying Risk Profiles

• Single-let houses for families can come with a lower risk as the tenant profile tends to be families who have fallen on hard times, survivors of domestic abuse, refugees, asylum seekers or someone with a mild disability that doesn’t need live-in care.
• HMOs can be either high or low risk, depending on the tenant profile.
  
  • Homelessness is relatively low risk
    
  • Ex-convicts and drug and alcohol abusers are a much higher risk. This will be reflected in both mortgage and insurance rates.

What Sort of Property Do I Buy?

Well, it depends on several things.

• Tenant type
• Local demand
• Housing association requirements – these will vary enormously between different providers, so it is important to know what they want and how they operate before you start.

How Do I Start?

First, you need to find a provider, but it’s just as important to make sure you’re a good fit for each other. Take the time to understand how they operate, the type of tenants they work with, what responsibilities each of you will have, and how and when they make payments.

Where Can I Find a Provider?

There are several ways. In most areas, councils will offer ‘social housing’. However, as appealing as this might look on the surface, be aware. Often, this is the DSS option I mentioned earlier, and there can be cases where they take no responsibility for payments or maintenance. Councils can also be notoriously difficult to deal with. That said, they can tell you which providers have contracts with them for different departments, so it’s always worth asking for a list.

The best way is to go straight to the HA themselves. You can try calling, but in my experience, most receptionists could easily double as those at your local GP, as they’re incredibly hard to get past. I prefer to search for HAs in my area on LinkedIn or Google, then look for key people, like the CEO or Property Manager, and connect with them directly. I’d recommend sending a message explaining that you want to help people in need and would like to understand what they’re looking for and how you can support them. Then, arrange a coffee or video call and just listen. Build rapport and take it from there.

Will Any Property Work?

The type and location of property you need will depend on the provider and what they’re looking for. However, they will expect it to be in good condition, and their refurbishment standards are often higher than you might assume. For example, fire doors on kitchens and lounges (as these are considered risk rooms), first-floor escape windows, and additional sockets. Always ask the provider for a detailed list of their requirements.

Good Luck Out There

I hope that you have found this article helpful and that it’s given you some useful pointers on getting started with this strategy.

We can help you buy the right property or, if you already have a property in Leeds, Bradford or Wakefield, we can put the lease on for you. If you need a hand with this, or if there is anything else I can do to help you, contact me using the details below.

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