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UK social housing REIT attracts 'substantial' pension fund interest

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UK - Single Access Funding (SAF) looks set to launch the first UK social housing REIT in August after securing £30m (€37.3m) from unidentified local authority pension schemes.

Phil Shanks, who will manage the Houses for Homes REIT when it floats in August, declined to name the investors ahead of a meeting with AIM nominated advisers.

However, he did say the REIT had attracted "substantial interest" from pension funds.

The outspoken former social worker recently told IP Real Estate he saw potential for "a beautiful synergy" between SAF and pension funds.

"We need access to low-cost finance, and they need access to new sources of income," he said.

He added that his concern in launching the REIT would be to maintain operational independence.

"I'm sure these great financial minds know what they're doing, but I don't want them to lose sight of the delivery side and get in the way of us operating as a social housing provider."

The REIT - which Shanks has described as "my new favourite housing tool" -is targeting £500m of institutional investment for 4,000 new social housing units.

It will adopt a policy of "total risk aversion", shunning leverage, development risk and cross-subsidies.

"This is not a tool for developers but an investment-backed housing provision," Shanks said on his blog. "The objective is to achieve sanctuary in sustainability."

In separate news, a report from UK think tank IPPR claims local authority pension funds are "most likely" to fund new housing development because they "can be patient and their management boards include councillors, who understand both the need for more housing and the potential solid return over the long term offered by investment in it".

The report recognised continuing obstacles to pension fund investment, including returns, concerns about "investing in one's own backyard" and viable scale.

However, it cited decisions by Newham and Islington local authority pension schemes to invest in the Mill Group's residential fund, which co-invests with individual homeowners, and a proposal from former London mayor Ken Livingstone for direct pension fund investment in social housing, with the absence of management fees contributing to a more credible return.

In its latest paper from an ongoing review of the social and private UK rental market, the IPPR urged the government to shift funding for housing rent subsidies into supplementing the current £4.5bn targeted for development of new housing assets.

"To unstick housing policy, we need to advance institutional reforms which give local areas the power and responsibility to meet housing needs, including by enabling a shift in focus from subsidising rents to building homes," said the report.

The report also urged the government to allow local authorities to convert commercial property into residential and act as a clearinghouse for failed developers' land banks after allowing them to collapse.

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