Senior figures from the property sector have called on councils to revive ailing town centres by converting redundant sites into blocks for rent.
Skyrocketing demand for rent – due to a lack of mortgage finance – has made it an incredibly attractive investment class for pensions, experts will also say.
Many councils struggling under the weight of government cuts, have redundant sites such as car parks or old offices buildings. Because they are near to shops, schools and existing transport links, they would be perfect for redevelopment as rental blocks.
Speaking at the IPD Alternative Real Estate Investment conference in London, property chiefs said that if councils offer up land, they can enjoy guaranteed long term income without any up-front cost.
It follows a landmark deal in west London that will see a former Kensington car park turned into much-needed housing by Grainger, the UK’s largest quoted landlord.
The broader investment case for rental homes is also growing. Figures being publicised by IPD show that rental housing has continued to outperform traditional investment in offices, shops and warehouses that pension funds have traditionally favoured for safe, long term annuity.
IPD, which is the global benchmarking and performance analysts of property, showed a return last year of 11.3 percent for residential investment, compared with 7.8 percent for commercial property.
Phil Tily, managing director of IPD in the UK and Ireland, said: “Rental homes should be an open and shut investment case for pension funds, but there’s still an element of perceived risk around planning and construction. Getting this kind of model off the ground would help allay fears from institutions and over the next decade, rental homes could begin to sit alongside offices and shops as an investment class for leading funds.”
Nick Jopling, executive property director at Grainger Plc, said: “Councils are struggling with cuts, rising housing demand and vacant sites which lose money every day. There are many goldmines of opportunity out there to get long term income with little or no outlay. Our recent deal with the Royal Borough of Kensington and Chelsea will help pave the way for other local authorities to find creative ways of securing long term secure income and make better use of their land holdings.“
John Hitchcox, chairman of global property firm, Yoo, said: “We need to see this kind of creativity replicated across the country. While the government doesn’t wish to borrow, allowing the public sector to contribute land or assets in return for income is a sensible way to get development moving.”