New tool measures financial impact of housing projects on local community
The Local Multiplier 3 (LM3) enables the company to see how much investment a housing scheme brings to an area by analysing where the project income is spent and re-spent within the wider economy. The tool tracks how much money from a project is retained within the specific local area by monitoring the money which goes to suppliers, subcontractors and employees, and where they then re-spend the money.
Lovell has trialled the system in Pennyburn, North Ayrshire, where it built 22 homes for social rent for Irvine Housing Association. The spending analysis shows that every £1 from the gross project income generated an additional £1.03 locally (within a 25-mile radius of the housing development). The total local income generated from the project was £3.8 million.
To arrive at this figure, Lovell measured its own spending on the project – the income going to employees, subcontractors and suppliers – and then surveyed those people and organisations to establish where that money was re-spent. That enabled the company to calculate how much of the money had been retained locally.
Developed by the New Economics Foundation social and economic justice think tank, LM3 will enable Lovell to work out the ‘multiplier effect’ of its housing projects across the country - the impact that money flowing in from a project has on the rest of the local economy – and how it can be enhanced.
LM3 stands for ‘Local Multiplier 3, a three-step process which assesses the circulation of money within a local economy over three rounds of spending, with round one being total spend, round two spend on local suppliers and employees, and round three, the proportion of project income suppliers re-spend locally.
Lovell sustainability co-ordinator Alice Flint, said: “The LM3 tool allows us to assess the economic contribution our projects make at a local level and also identify areas where we can improve the impact of this spend in the local area.
“For Lovell, creating economic benefits for local communities has always been an essential part of the investment we make in the areas where we work. The value of the LM3 tool is that it enables us to measure and monitor how much of the spending from our projects stays in the local area and boosts the local economy. Our goal is to create a permanent ‘Lovell Legacy’ of benefits in every area where we build and the more money we can bring to an area, and which is retained in the local economy, the better it is for local incomes and living standards.
“Supporting local economic growth is also one of the Total Commitments which drives the sustainability agenda of Lovell’s parent company, Morgan Sindall Group.
“In addition, it enables the organisations who appoint us to demonstrate that they are meeting the requirement of the recent Social Value Act. The Act requires public bodies to take into account wider social, economic and environmental benefits when commissioning services, rather than simply focusing on cost.”
Nicola Thom, interim managing director of Irvine Housing Association, added: “The economic impact of this project coupled with other investment within Pennyburn has had a significant effect on the wider community in terms of employment, spending and local services. We are delighted that Lovell has been able to use this new management tool to analyse the impact of this spend in our new development. The trial demonstrates Lovell’s continued commitment to the local community.”
Lovell is now extending the trial of the LM3 tool using it to measure local economic impact on other projects across the UK.