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from their equity and fixed-income investments (around £55 billion), these large funds could easily commit to investing over £10 billion in the first Local Housing Development Fund. The committed funds would only be drawn down when the right investments needed to be funded.

Such an independent fund would invest in new mixed-tenure UK residential developments that should ultimately appeal to further pension funds and other institutional investors. The fund would have several advantages as an investment for individual local authority pension funds: • The fund would have the necessary economies of scale, with the skills and resources both to identify potentially profitable investment opportunities in residential property for rent — the most attractive segment of the US property market according to Invesco Real Estate, one of the world’s largest real estate fund managers— and to evaluate bids for investment support from promoters of local developments • The trustees of a local authority pension fund would be far less exposed to criticism if a local scheme were to go sour • There would be less concentration of risk and greater diversification in any individual fund’s portfolio • There would be the opportunity for pension funds (and local taxpayers) from poorer areas to benefit from investment in residential property for rent in more prosperous ones. The LPFA has provided the Commission with an assessment from 2010 of what it would take for a pension fund to invest in a housing fund:41 a total return of 8-10% from income and capital growth; an initial return in line with 10-15-year gilt yields, increasing in line with inflation; and a clearly defined end date for the fund of not

Bermondsey Spa, London © Levitt Bernstein and Hyde Group. Photographer Tim Crocker


Future Homes Commission Report  

Future Homes Commission Report