UK local authority funds should finance a social housing vehicle in an effort to attract institutional capital to the sector, according to the Royal Institute of British Architects (RIBA).
The architects’ professional body proposed the launch of the Local Housing Development Fund (LHDF), to be financed by local government pension schemes (LGPS), as part of a paper outlining 20 ways the UK central government and regional authorities could boost construction.
The RIBA also proposed the use of project bonds to attract capital to housing, suggesting special-purpose vehicles or a housing investment bank could be launched, and issue debt, to be sold directly to institutional investors.
It did not seem to think the LHDF should only be financed by LGPS, suggesting they should provide the “initial” capital, nor did it propose a minimum size of any such fund.
“Once such schemes are up and running, they would be able attract secondary institutional investment,” the RIBA noted.
Alex Ely, a member of the association’s housing group, stressed the “huge” shortage of affordable housing in the UK.
“Housing policy alone won’t be enough to solve a housing crisis with roots that are as complex as they are varied,” he added.
“The only solution lies in bringing together the public and private sector to promote, enable and finance new homes and improve the quality of the homes we already have and are already building.”
The notion of the LHDF was previously proposed by the Future Homes Commission, a 2012 initiative by the RIBA, which at the time hoped for a £10bn (€12.4bn) investment in a housing fund by the largest local authority schemes.
However, exposure to housing among UK pension funds has always been lower than that of its international counterparts.
A number of pension funds have nevertheless begun extending loans to associations providing affordable homes, with the schemes for BAE Systems extending £35m in loans to two providers, and the Lancashire County Pension Fund loaning Heylo Housing £300m.