Investing in community wellbeing: the economics of Community Asset Transfers

It’s estimated that local authorities have more than £2bn surplus assets sitting dormant on their books which communities could be capitalising. New research unpicks the economics of Community Asset Transfers (CATs)and seeks to better understand how local local authorities can invest in community wellbeing through CATs.

We all live in and have an interest in communities. A community is not only a group of people living in the same place or having a particular characteristic in common. Communities are networks that deliver local services and, critically, intangibles such as a sense of belonging, social cohesion and cultural identity.

Communities would be made much stronger, when decisions take better account of these intangible social benefits. This is easier than ever - we should start making the case.

A good example of the importance of accounting for social value is Community Asset Transfers (CATs). Public authorities (often local authorities) sell unused land or buildings to community businesses – social enterprises in a range of sectors generating over £1bn income each year – at prices below market value rather than to private property developers. Although the acronym CAT seems complicated and technical, community assets are part of our everyday life: community-run leisure centres, libraries, swimming pools social care centres – to mention a few.

Accounting for social benefits would encourage public authorities to transfer real assets rather than liabilities. This matters. Since 2010 there has been a 51% decrease in government funding for communities. By altering our approach to decision making - in spite of large cuts in funding - pockets of communities can prosper.

Volunteers from Pro Bono Economics, working with the charity Power to Change, have produced a guide for local authorities investigating this issue. The guide aims to provide a clear framework for councils to measure social benefits in communities.

Why focus on Community Asset Transfers?

It’s estimated that local authorities have more than £2bn surplus assets, sitting dormant, on their books. CATs are enticing, because – assuming the transfer is successful - assets worth value to communities can be put to use.

Why do local authorities hold surplus assets? Why are CATs not conducted more often? There are three standout reasons.

Firstly, there is a lack of evidence on the impact of giving communities control. In fact, the evidence on the intangible benefits of community ownership is simply not available. This is the crux of the issue. Community proposals rely on proving the ‘greater good’ to stand above private investments or the option of doing nothing.

Secondly, community proposals often lack a consistent framework - or one at all. As a result, local authorities struggle to make effective comparisons or interpret key trade-offs which help guide a decision. A basic economic framework - looking at the case for change, assessing options for resources and evidencing outcomes - would help decision makers in this context.

Thirdly, the benefits or costs of doing such transactions are local, bespoke and difficult to explain. Local authorities doing effective CATs engage with communities early and seek their inputs in decisions.

All in all, communities need a positive push. CATs can play a role if these issues are overcome. Local authorities would do well to: engage with communities, use consistent frameworks and capture evidence on social benefits.

How to measure the intangibles?

Measuring social benefits, is not just conceptually alluring – it’s becoming an obligation. Social value was brought into law through the Social Value Act in 2012. Whilst, in practice, there are various ‘technologies’ – to suit different requirements - that do the empirics.

The Three Stages Well-being Valuation method, allows a decision maker to put a monetary value on social change. It’s relatively straight forward to use - even if the mechanics are complex to understand. The data is publically accessible and free to access here.

Alternative methods also exist. Social Return on Investment (SROI) is widely used by the third sector, but probably not fit for purpose in context of CATs. Some local authorities have made their own attempt to measure social value: Birmingham City Council, for example, with the think tank Rich Regeneration created a publically accessible social value tool.

To some, these approaches seem far too arbitrary. And, admittedly, they cannot contend to be perfectly accurate. However, they are likely to be accurate enough to ensure social benefits are thoroughly considered and that’s a serious feat.

What next?

Local authorities should start including wider economic, social and environmental outcomes in their decision making. People engaged in local social action could hold teach-ins with community business, experiment with local initiatives and lobby their local authorities. Against a challenging economic and social context for communities - a change in approach, can help them thrive.

Robert Marks is a policy adviser, member of the Government Economic Service and volunteer from Pro Bono Economics, the charity that helps other charities and social enterprises understand and improve their impact and value, with a central focus on well-being, using economist volunteers.

Read the full report on the Economics of Community Asset Transfers by Federico Bruni, Vyara Ruseva, Stuart Newman and Robert Marks with a foreword by Sir Alan Budd.