According to a report by the British Property Foundation and London Councils published on 10 February 2011, institutional investors are poised to invest up to £1 billion each in the private rented sector.
The report, Invest to Rent, suggests ways local authorities can make investing in the private rented sector more attractive to pension funds and insurance companies. It suggests that councils:
- Make land available for housing developments in return for a share of sales or rental income, or as part of a full joint venture
- Allow developers to make a proportion of homes available for below market rent
- Support tenants to pay upfront costs
- Work with investors to broker deals between investors and other public bodies, where they own the land
The report says institutions look for an average return of 8%-10% per year over an investment period, professional asset management, the potential to sell individual homes, economies of scale and for a variety of properties. They are also interested in schemes of a high build quality and locations close to transport and amenities, it states.
Steve Bullock, executive member for housing at London Councils, said: ‘In these challenging times, those investors and boroughs that are most able to adapt and explore new ways of delivering homes will be best placed to deliver the secure, high-quality homes that Londoners need.’
The ‘Invest to Rent’ brochure can be downloaded here »
Taking into account modest property appreciation, the ‘Buy To Help’ initiative has the ability to deliver similar returns. However, ‘Buy To Help’ has the added benefit of zero rental voids due to the fact the tenant is the owner of part of the property with the lifetime right to remain in occupation. Additionally, the institutional investor delivers a social good by helping people with learning disabilities achieve the one thing they seek the most – a home for life.
A mix of ‘Invest to Rent’ and ‘Buy To Help’ would seem to be a perfect mix for institutional investors.
Download the brochure »