The Government's plant to free up tax-efficient property investment vehicles in the affordable housing sector will be a 'green flag' for the first social housing real estate investment trust (REIT).
Single Access Funding (SAF) is set to launch its REIT in September, following closely on anticipated approval of legislation easing entry into the market.
Having targeted £500 million of institutional investment, SAF are planning a 'roadshow' to raise funds during May. Co-founder of SAF, Phil Shanks, said he expected to have between £200 million and £300 million of funding in place by September.
The finance will provide up to 4,000 new social homes, initially extra care and supported housing. SAF will pool groups of properties provided by local authorities, before leasing them back to council-nominated housing associations.
The SAF REIT will aggregate these groups of properties, which would otherwise be too small to attract the level of institutional investment required to launch a standalone vehicle.
Investors, including pension funds and insurers, will see returns of 4%.
Phil Shanks commented - "The key thing for us is the guarantee of income, as then you can get lower returns", adding that the economic climate has made the security of investing in social housing more attractive to institutional investors.
SAF confirmed that it had commitments or indicative agreements from at least four councils looking to be involved in the REIT.
The Government is consulting on how to adapt legislation around REITs to help attract new investors into social housing. Some changes have already been included in the Finance Bill, which is expected to come into effect in July. These include the scrapping of a 2% levy on starting a REIT and a three-year grace period before the vehicle has to be listed on a stock exchange.
