Chamberlain Walker

A report on social value for Metropolitan Housing

Metropolitan’s new housing supply created £33m of social value last year

(And a good financial return, too)

Last Winter, ChamberlainWalker began a project with Metropolitan Housing Trust to conduct a fully Green Book-compliant assessment of the social value of their work. Metropolitan is a large, London, South East and East Midlands-based housing association, with around 37,000 homes under its ownership or management.

We approached our assessment in exactly the way we would have done when we were back in Government preparing for a Spending Review (with the usual, intense, HM Treasury scrutiny that entails). That meant a very strict analysis – following the well-established Green Book rules, and definitely no ‘Enron Accounting’ with associated double-digit benefit-cost ratios, all too often presented in this field.

We were asked by Metropolitan to look at four areas of their business: their new house building, their care and support for elderly and vulnerable people, their interventions helping people into work, and their affordable homeownership schemes. The analysis would identify the social value captured by the market and that not captured by the market through well-accepted ‘willingness to pay’ techniques, and account fully for ‘techy’ economic concepts like intervention ‘deadweight’ and ‘substitution effects’ drawing on assumptions used by officials in Government. It avoids the subjective wellbeing approach, a methodology the Green Book suggests is an evolving feast.

In 2016/17, Metropolitan built 826 homes, provided care and support to around 10,000 elderly and vulnerable people – our analysis covered 8,150 of these, including elderly people, people with a mental health condition and those with a learning disability. Metropolitan also supported 580 people into work (sustained for at least three months) and provided access to affordable homeownership for 300 people.

Often a problem with the term ‘social benefit’ is that it is woolly and tries to account for the intangible. Our social benefit analysis only included concrete, quantifiable, tangibles. For new house building this meant: land value uplift (captured by market prices) and the distributional benefit of providing subsided housing (i.e. transferring resources from rich to poor), as well as some minor external health benefits associated with less overcrowding, all set out in the DCLG (now Ministry of Housing Communities and Local Government) appraisal guidance. For care and support, it included: the financial savings of keeping people out of residential, nursing and hospital care – again captured by market prices – and improved quality of life from living at home as independently as possible, captured through an independent assessment of the willingness to pay for quality of life (borrowing from the Quality-adjusted Life Year, or ‘QALY’, concept used in health economics).

We already knew that Metropolitan made a healthy operating surplus for the year 2016/17 of £96m, with £15.5m from their care and support business and over £11m from selling the homes they built for shared ownership (1st tranche sales) and outright sale.

But what was the social benefit uncovered by our analysis of the four areas? All told, we identified over £56m of net social benefit (‘net’ being social benefit minus social cost). This included £33m from house building (plus £0.75m from the affordable homeownership it enabled); £18.5 from care and support; and nearly £4m from getting people into and sustaining them in work.

Per £ of metropolitan investment (Social Return on Investment or SROI), new (affordable) house building created 70 pence of net social value as did care and support, whilst their employment interventions created over £6 of net social value. So employment interventions come out top for SROI. The flip side is that employment interventions lose Metropolitan money, whereas new house building and care and support both yield healthy financial returns (as well as, of course, social value).

All in all, our analysis shows that housing associations like Metropolitan can deliver social value and a financial return to reinvest in the things that matter most. “Commercially-minded versus socially hearted”, anyone? Perhaps they are more complementary than we think.