The potential for equity investment in UK social housing will not be realised without providers and investors being more convinced of the mutual benefits of such investment, according to a new study.
Research conducted by the Cambridge Centre for Housing Planning and Research for the Investment Property Forum (IPF) found that shared-ownership housing and intermediate rental housing is better suited to more equity investment than core social housing.
Professor Michael Oxley, of the centre, presented the research at the IPD/IPF Property Investment Conference in Brighton today.
Considering how equity investment by institutional investors can be expanded in the UK social housing sector, the study found that asset cover ratios are not stretched enough for equity style finance to be sought.
The analysis of both investors and housing assocations examined opportunities to inject new sources of funding into the market to support more affordable housing.
The analysis also found that housing assocations have concerns that less governmental support for the sector and lower rental increases will squeeze reserves, leading to a cautious approach to expansion.
Capacity constraints on expansion, chiefly land and development limits, mean funding requirements are unlikely to change.
The study also found concern that index-linked payments by housing assocations to investors may become less affordable over time.
The findings comes as the UK experiences stretched affordability and low levels of house building, as well as growing pressure on both the public and private rental sector and the wider UK residential market moves away from being owner-occupied.
At present, IPF said UK institutional investors have “very little equity ownership of social housing”, with just £400m equity investment in the sector – a “tiny fraction” of the value of the country’s social housing.
IPD said that equity does not seem to offer obvious models that could be readily implemented in the UK without ”substantial institutional change”.
“Where such investment is significant, it is supported by a policy environment that includes tax incentives,” the industry body said. ”Development of such models in the UK would require substantial changes in housing finance and taxation and the political will to make such changes permanent.”