Group of housing associations modelling build-to-let returns

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

Housing associations should kick start build-to-let developments by selling new units to investors, which would give them funds to build more new homes, according to a new report.

Think tank, the Resolution Foundation, says the planned conversion of the Olympic Village to 1,400 long-term private rental properties should serve as an "inspirational model for how to tackle the UK’s housing crisis".

It has identified an urgent need for high quality and secure rental homes and says institutional investors, housing associations, councils and the Governmet have key roles in making that happen.

It has thus developed a financial model for debt and equity investment in the private rented sector, in collaboration with the Royal Bank of Canada (RBC), to get new build-to-let developments funded by institutional investors going.

With public funds for new supply drying up, it wants housing associations to kick start build-to-let developments by building new units which could then be sold onto an investment fund enabling providers to build more new homes.

It's currently working with a group of five registered providers to model the returns that would be generated from this approach - the details of which will be published this autumn.

Vidhya Alakeson, director of research and strategy at the Resolution Foundation, said: “More and more families find themselves in the private rented sector, they urgently need access to better quality housing options. Institutional investment in build-to-let provides an opportunity to create new, professionally-managed homes better suited to long term tenants. It also increases the overall supply of housing whilst boosting the construction sector.”

Giles Tucker, European head of infrastructure at RBC Capital Markets, said: “RBC is  committed to remaining at the forefront of research and innovation in the social housing space - a sector that has the potential to play a central role in the revival of the UK economy.” 

The report also says councils should designate sites for private rented sector development rather than residential in general and is calling on the Homes and Communities Agency to designate a proportion of public land specifically for build-to-let homes.

The report is based on a financial model for debt and equity investment in the private rented sector that the Resolution Foundation has been developing in collaboration with the Royal Bank of Canada (RBC) over the last 12 months. It can be found here.