Thursday, 19 January 2017

French developer eyes UK social housing market

A French developer is planning to enter the UK affordable housing market using institutional and private investment to finance homes for social rent.

IPERL, which has already developed 5,300 affordable rented homes in France, has held early talks with several large UK housing associations about taking up its co-financing model funded by pension investors.

Under the model, IPERL both buys and builds blocks in prime locations and then sells the freehold to private and institutional investors at a 35%-40% discount.

Housing associations then buy the rights to use the properties at a reduced VAT rate for between 15 and 20 years and let them to tenants at discounted rents.

At the end of the period, the homes are returned to investors and tenants are either relocated or can buy their homes.

Investors, who receive an annual return of between 5% and 8% generated by the accrued capital value, the initial discount and tax benefits, have so far committed €1bn in France.

Having raised €40m from pension fund Primonial, IPERL is now working with law firm Baker & McKenzie to adjust its model for the UK and plans to launch an institutionally backed UK fund.

This would initially finance between 300 and 500 homes.

Marc Bonjour, director of public affairs at IPERL, told Inside Housing that in France the model had also successfully created a secondary sales market so that investors could sell the homes after five years.

He added that the model would enable housing associations to house more people at a lower cost.

IPERL, a subsidiary of French property manager PERL, is the latest of a wave of new entrants tabling various equity funding models for UK affordable housing.

Last week Aviva Investors launched a lease and leaseback model that will use pension money to build homes on council land for private rent and 45% social rent.

This follows the entry of new funding players including Octopus, which last October formed a joint venture with private developer of grant-free housing QSH in order to build homes that will either be rented at a discount or sold via a Rent to Buy scheme.

Similarly, Cheyne Capital, has committed £700m through its Social Property Impact Fund to build, acquire and finance affordable housing, while Salamanca Group, a merchant bank, launched a fund called Funding Affordable Homes to invest in building affordable housing.

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