[TheLandIsOurs] update on privatisation of social housing

[david bangs]

 From 'Inside Housing'


Associations to raise £500 million with stock exchange ‘privatisation’ plan


Landlords to float on stock exchange

18/05/2012 | By 
<mhtml:{88A603B7-B778-4458-A092-2C20C9B49390}mid://00000030/!x-usc:http://www.insidehousing.co.uk/nick-duxbury/464.bio>Nick 
<mhtml:{88A603B7-B778-4458-A092-2C20C9B49390}mid://00000030/!x-usc:http://www.insidehousing.co.uk/nick-duxbury/464.bio>Duxbury
http://www.insidehousing.co.uk/finance/landlords-to-float-on-stock-exchange/6521887.article
A consortium of 10 housing associations is to 
list a company made up of 10,000 social homes on 
the junior London stock exchange in September.
In a move that will be viewed as a step towards 
the ‘privatisation’ of social housing, the launch 
of an aggregated social housing real estate 
investment trust, known as a REIT, will see 
investors trade shares and hold the associations 
to account over the management of their stock for the first time.
Until now, landlords have relied on raising cash 
from grant funding from the government or through 
debt lent by banks or raised from investors on the capital markets.
The government wants to see institutional 
investors plough cash into the social housing 
sector through tax efficient REIT vehicles 
instead, and is currently carrying out a consultation on how this can be done.
Under the aggregated REIT model devised by law 
firm Winkworth Sherwood, 10 small south 
east-based associations hopes to raise an initial 
£500 million by floating on the Alternative 
Investment Market to increase in size by up to a third.
The participating associations, which cannot be 
named due to stock exchange rules, plan to use 
the cash raised to invest in building homes and buying section 106 sites.
Institutional and retail investors will receive 
returns of around 4.5 per cent over a 40-year 
period that will be indexed to social housing 
rents so that landlord and investor liabilities are matched.
At the end of the 40-year period ownership of the 
properties will revert to the associations, which 
will continue to manage the homes throughout.
Keith Jenkins, senior partner at Winkworth 
Sherwood, claims the firm has developed a 
mechanism to avoid the REIT being regulated by 
the Homes and Communities Agency - although he 
declined to give details, citing commercial confidentiality.
‘We are satisfied this will be treated as a straight financial risk,’ he said.
Mr Jenkins conceded it posed some risk to 
participating landlords if rents fell, but said 
this was manageable. He also argued introducing 
shareholders would make landlords more accountable.
‘People say we don’t want to be selling the 
family silver [housing assets], but if you are 
not a silversmith why hold on to it? It is 
joining with private investors to create more 
social housing. The Treasury consultation can be 
read as an examination of how the government 
could use REITs as a way of compelling 
associations to permit private investment. If 
this is true, the argument today would be REIT or REITed.’
Lucy Thornycroft, interim head of investment 
policy and strategy at the National Housing 
Federation, said: ‘There is no inherent conflict 
of interest between bringing new sources of 
equity funding into the sector and protecting new 
and existing tenants, though regulatory and risk 
implications will need careful consideration.’
Winkworth Sherwood is also preparing to launch a 
second REIT that will buy market sale properties 
built by three large associations at a wholesale 
price, but will provide security of sale for the participating landlords.





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