Invest&Fund: P2P platforms play key role in affordable housing conundrum
Invest&Fund believes peer-to-peer property lending platforms, like itself, can play a vital role in what it calls a “brave new world” of affordable housing development financing.
In its latest blog, the platform discussed the challenge of how to financially incentivise local private sector developers to build more affordable houses without impacting their yields and margins over time.
“It must be attractive enough for private capital but not so appealing that everyone loses sight of what we are trying to achieve, while simultaneously placating local concerns,” Invest&Fund noted.
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It believes a recalculation of affordability may be needed to help solve this conundrum. Data from 2022-23 shows that more than 63,000 affordable homes were delivered in England, representing a 7% increase year-on-year. Once you fast forward to today, the average house price in the South East of England stands at £373,000.
“Even with a 20% discount, you are still working off a multiple of x8.5 the average individual income, making it almost unaffordable,” Invest&Fund explained.
“The issue is incomes haven’t kept up with house price inflation, so the metric of what constitutes an affordable home will probably need to be reassessed.”
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It is also worth considering that affordability is driven by supply. This is a problem because house prices have increased in real terms by 441% yet construction has fallen by 46% over the same period, according to the London School of Economics.
“This conundrum is a considerable challenge, infinitely complex, with more conflicts of interest than a game of Risk,” the platform noted.
Nevertheless, when it comes to incentivising SME developers to build more affordable houses, Invest&Fund believes there is hope.
“The brave new world of development financing will have to assume all of the nuanced hallmarks and disciplines of impact investing to solve all of our national issues, whilst having feet in both the public and private sectors. That is where multi-faceted fintech platforms in our space will thrive,” Invest&Fund concluded.
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