“Save House” Fund
Filed the resolution inspired by our Salvacasa project. Wednesday 21 October 2015 by the Hon. Gitti, in the Finance committee (VI commission).
The idea of the “Salvacasa Fund” was born in Fondazione Etica thanks to one of its founders, Francesco Guarneri. It represents a tool that allows economic and social intervention to coexist. The decision to sell residential mortgage portfolios by the territorial banks is a decision that can have a significant social impact and therefore in…
In Italy, the economic crisis gradually impoverished various social groups, as it did in other countries. The statistics supplied by the charitable organisation Caritas are alarming. The requests for assistance from individuals who were only recently considered well-off continue to grow without precedent.
Many of these individuals risk losing the homes they bought in recent years when banks thought nothing of approving mortgages for first-time buyers for amounts often covering the whole purchase value. When the economic crisis came upon us, it meant that many homeowners were no longer able to make their loan payments, resulting in the subsequent confiscation of their homes by the creditor banks, who would later put them up for auction, leaving the owners out on the streets. This phenomenon is on the rise. On a national scale, projected property confiscations for over the next 5 years are estimated at 248,000 homes (Source: Ministry for Justice).
That number means that (accounting for a family of four) around one million people in Italy are at risk of homelessness: this does not just mean that they will be left without a home, but without the sense of identity and affection that comes from owning a home. This is unquestionably a traumatic event for any individual and destabilizing for the whole family. Ultimately, this ends up becoming a collective problem, as social tensions will inevitably ensue.
This phenomenon highlights a serious risk for the banking industry, which has already been seriously put to the test by the huge number of non-performing loans that are now in litigation due to the failure of numerous businesses. Amid a collapsed property market, the banks are often unable to sell off confiscated properties, thus incurring huge property management expenses. Banks often find themselves forced to sell the properties at a far lower price in order to recoup their capital.
What is evident is that the government cannot handle the problem on its own, just as it cannot continue to turn a blind eye to the issue. We propose to take inspiration from the new measures put into effect in Great Britain and supported by the European Commission. This is what is known as social impact investing. The government becomes a partner with the private investor, guaranteeing them a financial return based on the outcome of the investment.
This is where the idea for The S.O.S House Fund came from. The fund buys up the auctioned-off properties and then leases them to their previous owners at a more manageable and sustainable rate.
The S.O.S. House Fund targets institutional investors, namely the Cassa Depositi e Prestiti (Loan and Deposit Fund) as well as banking foundations and cooperative credit banks. The maximum amount of the fund can be earmarked to purchase these properties at the public auction. A financial intermediary which is assigned on an ad hoc basis (for example an asset management company), and given the task of contacting the previous owners to offer them a reasonable tenancy rate for the apartments, and to include a second “put and call” option which will allot the owners time to forfeit or buy back the apartment.
Those who deal with the leasing of the properties would be non-profit groups (think for example of charitable institutions, trade union organisations, and not-for-profits such as Caritas). With their well-established networking abilities, they are able to choose the requests from the previous homeowners and potential tenants, paying particular attention to the most vulnerable individuals and families, and collaborate with the banks on the agreed divestiture of residential properties in specific geographical areas.
The main benefits of this investment are:
the transparency of the public auction, the likelihood of passing the property over to the previous owner or tenant, making the investment an immediate asset. Other benefits include relieving the banks of the upkeep costs to the confiscated properties, while decreasing the risk of fluctuating property prices with properties sold at very low prices. A strong and positive social impact will also stem further aggravation to the housing crisis and all-around public order.