Three things social housing should steal from commercial real estate
I once read an article called Three things football can learn from rugby. I loved the premise: two sectors with plenty of differences, but enough in common that they could look across at each other and steal with pride.
It made me think about social housing and commercial real estate.
Both own and manage large property portfolios. Both face rising costs, ageing assets, decarbonisation pressures and increasing expectations from customers. And both need to find ways of investing significantly in their buildings at a time when finances are constrained.
But commercial real estate has, in some areas, moved further and faster in thinking differently about how buildings are funded, operated and managed.
There are three things in particular that social housing could borrow.
1. Treat buildings as energy assets
Whether it is social or commercial real estate, buildings have roofs. And those roofs can generate value.
One well-established model in commercial real estate is the Power Purchase Agreement (PPA). Rather than the property owner funding solar upfront, a third party finances and operates the system under a long-term agreement for the energy it generates.
Done well, that can improve the energy performance of a building, provide electricity below prevailing market rates and offer some protection from energy price volatility.
Increasingly, the opportunity goes beyond solar alone. Battery storage, energy management technology and flexibility services can all form part of the commercial model.
The important shift is conceptual.
Commercial real estate has increasingly started to think of buildings not simply as consumers of energy, but as energy assets capable of creating value.
Variants of these models are beginning to emerge in social housing, but we have yet to see them adopted at significant scale.
Lesson one: think about what an asset can generate, not simply what it costs to run.
2. Buy outcomes, not necessarily equipment
There is another interesting lesson in how energy infrastructure is owned and operated.
Energy Service Companies and performance-based contracts allow a third party to own and operate energy equipment, with the property owner effectively procuring heat or energy as a service.
That changes the question from:
How do we fund and own this equipment?
to:
What outcome do we need, and who is best placed to deliver it?
There are good reasons why this is harder in social housing. Communal heating systems, for example, can be relatively small, fragmented and historically under-invested. The market around them is also less mature.
But that may be a market-making problem rather than a fundamental flaw in the model.
At Pineapple, this is one of the areas we are exploring: whether better aggregation, commercial structures and partnerships can make service-based models viable for social landlords.
Lesson two: focus on the outcome the landlord and resident need, rather than assuming the landlord must own every part of the solution.
3. Manage energy actively
Installing technology is only part of the job.
Commercial real estate has become increasingly sophisticated in what happens afterwards: using controls, storage, demand flexibility, data and optimisation to manage energy dynamically.
That can improve building performance, contribute to decarbonisation and, in some circumstances, create additional financial value.
It also encourages a different way of thinking about an asset.
Instead of considering energy primarily through the lens of repairs, maintenance and utility costs, owners start to think about the asset's performance across its whole energy lifecycle.
Social housing is beginning to explore this too. But there is considerably more opportunity to treat homes as participants in an increasingly dynamic energy system.
Lesson three: use technology, data and active energy management to get more from the assets we already have.
The difficult bit isn't always the technology
I spend a lot of time working with housing providers and businesses trying to make models like these work - and making them work in practice is anything but straightforward.
The tricky bit is building the commercial structure. Who funds what? Who carries the risk? How does the landlord procure it? How are residents protected? What does the board need to approve? And how do you move from an interesting pilot to something that works across thousands of homes?
Social landlords are also operating in an intensely regulated environment with extremely busy day jobs. There is little reward for being first and potentially significant consequences if an innovative model goes wrong. That makes collaboration particularly important.
Progress comes from providers, funders and service partners working together to test, refine and improve commercial models until they become investable, operationally credible and capable of scaling.
And if anything, today's pressure on housing finances makes that innovation more important, not less.
Social housing doesn't want to become commercial real estate. But when we are confronting many of the same challenges, there is nothing wrong - and a lot right - with stealing the good ideas.
