“From the supply side, there are two main players in the Italian social housing market: cooperatives and real estate funds. In Italy, it comes from tradition: in particular, from the development, by cooperatives, of residential buildings as a post-World War II growth, in which houses were granted, to workers, with controlled rents.” Francesca Zirnstein, CEO of Scenari Immobiliari, continues stating, that cooperatives generally build housing with controlled prices through the direct investment of interested private individuals, who participate in this form of real estate initiative.
The Recent History of Social Housing
“Then, alongside the world of cooperatives, a new player has emerged over the last 20 years, coming from the world of real estate funds and developed thanks to the initiative of Cassa depositi prestiti,” Zirnstein continues. Since the 2000s, the development of this sector has taken place through the experience and intuition of Fondazione Cariplo and Regione Lombardia, which first promoted the Fondo Immobiliare di Lombardia, the most important real estate fund dedicated to the development and management of social housing, managed by Redo Sgr, a company that designs, develops, and manages real estate assets with a shareholder base composed of Fondazione Cariplo (40%), Cassa Depositi e Prestiti (30%), InvestiRe Sgr (20%), and Intesa Sanpaolo (10%).
“The Fondo Immobiliare di Lombardia, with approximately 590 million euros raised, includes institutions such as the Fondo Investimenti per l’Abitare (FIA), managed by CDP Investimenti Sgr and subscribed to by Cassa Depositi e Prestiti for 1 billion euros, in addition to Fondazione Cariplo, Regione Lombardia, and other institutional investors,” explains Andrea Vecci, impact, sustainability & communication European climate pact ambassador at Redo Sgr, adding that the FIA system raises about 3 billion euros for 29 “local” real estate funds.
Regarding the 3 billion euros of real estate value activated in Italy, Elena Molignoni, head of the Real Estate Market Observatory at Nomisma, explains that “1,900 social housing units and 7,100 student housing and temporary residences have been built.” Molignoni then goes on to say that “outside the FIA, the production of social housing is widespread and fragmented and cannot be quantified. At the beginning of the year, a new fund, the Fnas, was introduced, which integrates the FIA with a new availability of capital to invest in social housing projects and renews the FIA, particularly in territorial coverage: from local to national, and on the acquisition procedures of investment proposals: from direct acquisition to market solicitations with expressions of interest that respond to criteria of social, economic, and environmental impact of interventions. In particular, these are interventions focused on the ‘3 S’ of sustainable living: social, student, and senior housing.”
The Main Social Housing Projects
With the goal of achieving net-zero carbon emissions, there is great pressure to provide affordable housing that meets the highest standards in terms of energy efficiency and carbon emission reduction. “Among Redo’s most important urban regeneration projects with social impact and carbon neutrality, there are three major areas in Milan that will become the pilot of a fair and inclusive energy transition,” comments Vecci. “The Innesto is the redevelopment project of the Greco-Breda railway yard, in the northern outskirts of the city, which includes, among other things, the development of 400 social housing apartments and 300 student housing beds on an area of approximately 70,000 square meters. Green Between, on the other hand, is the urban redevelopment project of the Crescenzago area, which will develop approximately 340 social housing apartments on approximately 24,000 square meters, connecting the city to the Lambro Park through a green boulevard animated by services and urban commerce. Finally, the last and largest project is the redevelopment of the ex-Macello of Milan, which covers a total area of 150,000 square meters adjacent to the Foody fruit and vegetable market in the eastern area, Calvairate. L’Aria ex Macello, among other things, includes the development of 1,200 social housing apartments, a 600-bed student dormitory, and a 30,000 square meter public urban park.”
Social Housing: Investors and Expected Returns
Who does this sector target specifically, and what kind of returns are we talking about?
“The social housing market is primarily aimed at investors with long-term perspectives (institutional, insurance, pension funds) but also at HNWIs who want to diversify,” Vecci replies. “These are operations that require impact investing, with low return objectives,” Molignoni adds. From this latter point of view, “social housing historically has a return that is a proxy for inflation (around 3% + inflation) in line with the impact objectives it sets and in line with the risk/return profile of operations (low-risk and long-term investment),” Vecci points out, adding that “projects with broader functional mixes that include not only social housing but also free portions and other functions of urban regeneration with social impact lead to higher risk-return profiles closer to market values.”
The Gaps of Social Housing to Overcome
What is the difficulty in this sector?
“The fact that the construction world has very high costs, which have grown by 20-30% in just the last two years. So to maintain goals of controlled prices and rents on one hand and minimal returns on the other, the action that must be taken starts from the fact of having land (or properties to be transformed) available at very low values,” Zirnstein adds. “This is why social housing funds and operations have done well in the most dynamic regions, such as Lombardy (especially in Milan), Emilia Romagna, and Piedmont, while in other regions, they have struggled much more.”
The reason? “This type of offer is more attractive where there is a big gap between the market value and the value of social housing. For example, if in a city the price of used property is 2800 euros per m2, approximately the same value as new social housing, it is not certain that a potential customer will choose the social housing operation, even if it is a new construction because these operations also come with rules. It is not a pure and classic residential sale. To reduce costs, for example, the private apartment areas are slightly smaller, but there are many common services, and a good social manager (who is the condominium manager) is needed, who can ensure that the cohabitation works well and is therefore capable of intervening to prevent crisis,” Zirnstein concludes.
Senior Housing
In Italy, the traditional offer of housing services related to the level of autonomy of the elderly, from nursing homes to those who take care of the elderly in their own homes, sees public entities with personal service companies, third-sector organizations, and religious entities as protagonists. “Within this system of supply, senior housing is positioned as an alternative to the reception model, typical of community residences for assisted living and the residential model, for independent living. It is a housing service managed by the private or social private sector, which uses a property with private and collective functions, designed to meet the needs of independence, socialization, and light assistance, integrated with the offer of services with an aggregating matrix,” explained Elena Molignoni, head of the Real Estate Market Observatory at Nomisma, who then concluded by saying, “In Italy, the spread of this housing model clashes with the difficulty of being able to reconcile a service that provides an economic return and, at the same time, provides a social response, that is, an advantage for everyone: investor and community.”
Student Housing
In Italy, the number of University students has exceeded 1.8 million in the last two years, with an increasing number of international students. In particular, Rome remains the main Italian city for university students (approximately 280,000), followed by Milan, which boasts the highest number of international students in absolute terms (over 20,000). As reported by Savills, within the “Italy Student Housing” report, stating as well “the total supply of student beds in Italy is about 67,400, with a growing presence of modern student housing facilities, managed by specialized operators in line with international standards. The total expected pipeline is about 24,000 beds that will be available on the market in the next two years, with most openings expected in 2025. However, despite the significant increase in available beds, the number will not be enough to meet the growing demand, especially in the cities of Milan and Rome, where the number of mobile students exceeds 50,000”
