Consultation on social housing REITs launched

Published by 24publishing for 24dash.com in Housing and also in Communities, Local Government

The Treasury has launched a joint consultation with Communities and Local Government on social housing Real Estate Investment Trusts (REIT), as announced in George Osborne's Budget last month.

The chancellor said the Government wanted to explore the role REITs can play in supporting the social housing sector - a move welcomed by a number of housing associations including Places for People, Home Group and Knowsley Housing Trust.

The current Finance Bill is introducing a series of measures to support entry to and investment in REITs. This consultation, says the Government, will build on these measures considering potential further changes to the framework to support the establishment of social housing REITs.

It’s being viewed by the sector as another way to plug the gap in grant funding – allowing providers to raise new capital to recycle into housing provision.

Converting a housing association subsidiary to REIT status would allow investors to invest in social housing property. Because REIT status would spare landlords from paying corporation or capital gains tax on profits made from investment, it would allow them to pay higher dividends to investors. For providers, a REIT offers the prospect of raising funds from equity investors.

It's understood providers could put some or all of their portfolios into a REIT spin off – whose shares are publicly traded – allowing investors to invest in their portfolios. Alternatively, they could club together in a consortium to develop and manage a REIT.

Chapters 2-3 of the consultation covers social housing whilst chapter 4 looks at whether to change the tax treatment of income received by a REIT when it invests in another REIT.

Housing Minister Grant Shapps said: "I am determined that we do all we can to get Britain building, and these reforms will help build more affordable homes, boost investment in housing and increase choice for tenants.

"That's why we're launching today's consultation, to see how we can best break down the barriers that prevents private investment in social housing - with the turnover from housing associations now at over £12 billion this should be seen as a sound and stable investment to those looking for a long-term return."

The housing minister also welcomed today three new for-profit providers who have been awarded registerd provider status - Orchard and Shipman, Shanly Partnership Homes, and Pinnacle Spaces.

Economic Secretary to the Treasury Chloe Smith said: "The Government is keen to see more affordable homes and encourage innovative ways of investing in the social housing sector. That's why we are exploring how Real Estate Investment Trusts could attract new private sector finance.

"As well as delivering much-needed accommodation for families, expanding Real Estate Investment Trusts into social housing could present value for money for the taxpayer. I look forward to hearing views during the consultation."