The European real estate investment industry has hit back at a report warning the EU against encouraging the involvement of institutional capital to help alleviate the region’s housing affordability crisis.
Last week, a study from EU Parliament’s Special Committee on Housing, concluded that institutional capital was being used to speculate on the housing market, driving up prices for residents – but European real estate associations have criticised its analysis.
The European Public Real Estate Association (EPRA) said the study demonstrated “persistent misconceptions about listed real estate and non-listed real estate”, and noted, in particular, that at times it confused real estate investment trusts (REITs) with investment funds, and conflated “tax treatment with tax avoidance”.
Jeff Rupp, director of public affairs at the European Association for Investors in Non-Listed Real Estate Vehicles (INREV), said “the whole report is built on very thin foundations and seems to want to prove particular conclusions rather than follow the facts”.
He criticised the study for making no meaningful distinction between listed and unlisted investors, or those with varying investment horizons. “Without a nuanced understanding of the difference between the types of institutional investor and types of investment, the study ends up concluding that all investors are susceptible to speculation,” he said.
“The whole report is built on very thin ground”
Jeff Rupp
“They don’t recognise that institutional investors – especially in the non-listed space – are the holders of long-term patient capital that’s seeking stable, albeit sometimes lower, returns to match the long-term liabilities they have.”
“Instead, they seem to want to ban all institutional investment into Europe’s affordable housing programme.”
The report’s authors, including academics Manuel Aalbers and Rodrigo Fernandez who have written previously about “housing financialisation”, made a series of recommendations to disincentivise private investment that might lead to speculation and price inflation.
What direction will the Parliament take?
In March, European Parliament adopted its official report on the EU’s housing crisis, in which it acknowledged “the strategic role of listed real estate companies in addressing” the situation. But last week’s study suggests that some members of the European Parliament look less favourably on the private sector’s involvement in the sector.
This could become significant as co-legislators begin to negotiate measures to achieve the EU Affordable Housing Plan, which was announced last year.
Mark Friedrich, a spokesperson for Venovia, Europe’s largest listed property company, pointed to estimates from Germany’s Federal Office for Building and Regional Planning that the country needs €100bn of annual investment to achieve the government’s national goal for new housing.
“For big-scale new construction and investment in existing portfolios, private capital is essential,” Friedrich argued, but warned that private capital will only come “if an investment-friendly environment and an appropriate regulatory framework exist”.
“By contrast, if regulation is tightened further, the opposite will occur – investments will be halted, and urgently-needed new construction will be prevented.”
“For big-scale new construction and investment in existing portfolios, private capital is essential”
Mark Friedrich
EPRA claims that only one in every 14 rental homes across Europe and the UK is currently institutionally owned, with the remaining 93% held by small private landlords, cooperatives, municipalities or other providers.
“Within that limited institutional share, professionally managed listed property companies and REITs represent only a fraction, underlining how far they are from exerting systemic influence over housing markets,” it told IPE Real Assets.
“Listed real estate companies provide access to global sources of capital, specialised expertise, and a proven capacity to develop and manage housing projects, making them important partners in expanding the supply of affordable and energy-efficient homes across Europe,” said the body’s director of public affairs, Tobias Steinman.
Rupp acknowledged the existence of cases in which the involvement of institutional investors had created negative effects on local housing markets, but he said there were plenty of examples of positive interventions too.
“It’s important to police the bad actors, but you shouldn’t throw the baby out with the bathwater,” he said.
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