Thursday, 18 December 2014

Plan would see £100m invested to help build 6,500 homes

Welsh trust to woo private backers

The Welsh Assembly Government is considering establishing a housing trust to pump private money into the social housing sector.

The idea arose from work commissioned by Jocelyn Davies, deputy housing minister, and the Principality Building Society to look into the development of a Welsh housing bond in May last year. The aim is to help the assembly meet its target of building 6,500 new affordable homes by 2011.

Peter Hughes, head of commercial lending at the Principality Building Society, confirmed one of the most ‘innovative and attractive’ options being discussed was the Welsh Housing Investment Trust, which would raise at least £100 million.

Mr Hughes will outline the principles in the first housing review in Wales to be launched by the Chartered Institute of Housing on 11 February.

Mr Hughes said: ‘Perhaps now is a good time for a strong institutional rented market. It you go back to the early 1990s and 2000s, everyone was interested in buy to let. It’s obviously not the market it was.

‘What may be needed now is not people who hold five or six or a dozen properties but institutions that are prepared to invest seriously.’

Banks, capital markets and possibly the Welsh government would feed money into the trust.

Mr Hughes said it would need at least £100 million from diverse sources put into it.

The trust would buy properties and housing associations would manage them.

‘This model works because of the mix of rent from the broad portfolio of properties in the trust,’ Mr Hughes said. ‘It gives sufficient income for the requirements of the trust.’

The hope is it would also kick-start the building industry giving ‘certainty for the exit for a developer’ in the current depressed market, Mr Hughes said.

He added the advantage with capital investors, such as life insurers and pension trusts, was that they put money in for the longer term. They would invest for 30 to 35 years compared with banks likely to put in money for 10 to 15 years, Mr Hughes explained.

In the review, he also points out the initiative has already got some ministerial support and is being looked at in more detail.

Vikki Hiscocks, policy and public affairs manager at the Chartered Institute of Housing Cymru, said the trust presented an opportunity to create a ‘Wales only’ solution to current problems.

‘If successful, this product could create greater certainty around the delivery of funding, provide an economic stimulus and ultimately help deliver more affordable homes.’

A spokesperson for the Welsh Assembly government said: ‘One option under consideration is the creation of a Welsh Housing Investment Trust which could provide finance for market and intermediate rent units as well as social housing.’

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