Political risks could discourage investors
Political and regulatory uncertainty risks discouraging institutional investors from putting money into social housing, a leading property body has warned.
In its response to a government consultation on social housing real estate investment trusts the British Property Federation warns doubts remain about whether the sector can generate sufficient returns to overcome the risks involved.
Real estate investment trusts are tax efficient vehicles designed to encourage institutional investors into the social housing market. The government consultation on social housing REITs, which closed last week, explored whether they could provide a useful mechanism for financing homes.
The BPF response states that while the idea of seeking innovative ways of funding housing is welcome, REITs will not be able to replace government investment.
Ion Fletcher, senior policy officer at the BPF, said: ‘Replacing a pound of grant funding, which does not require any form of commercial return, with a pound of private sector money, which will only be contributed if a commercial return is being made on that investment, will mean that either fewer new homes are built than with grant funding, or that those that are built must be let at a higher rate in order to generate an appropriate return.’