Is Social Housing The Next Great Investment?

The recent downturn in the housing market and the turmoil in the financial markets has created a new window of opportunity as the need for social housing increases...

The recent downturn in the housing market and the turmoil in the financial markets has created a new window of opportunity as the need for social housing increases. Rising unemployment figures and the likelihood of interest rate rises mean that many more will have to rely on the state to house them, and the lack of social housing means many will be looking towards the private sector for good quality affordable housing.

People can claim housing benefit if they are on a low income or are unemployed, or if they have little or no savings. Typical current limits for housing allowances are GBP 250 a week for a one bedroom property, including shared accommodation, rising to GBP 400 a week for a four bedroom property.

This allows a private landlord to charge an adequate level of rent knowing that the cost will at least be partially met by the government. Demand for rental property is currently high, and rents have been increasing, but many landlords have been worried about the prospect of tenants falling into arrears as the downturn takes its toll on the economy.

Renting to tenants who are claiming housing benefits would seem a much safer path to take than renting to tenants who may be at risk of losing their job. Many analysts are forecasting that the number of houses coming onto the market will continue to increase as interest rates rise and the government cuts public sector jobs. When people sell to avoid getting into debt, their homes are usually in good condition and perfect for letting out as social housing.

Pension funds are also looking at investing in social housing as it is considered to be very low risk as it offers financially stable returns. Up to 75% of the rent is covered by housing benefits and can provide a steady stream of income which is extremely desirable in the current financial situation.

The Scottish Government is currently seeking investments of up to 1 billion GBP to meet the growing housing shortfall, and the situation is similar across the UK.

With limited space, building output at all-time lows, unemployment soaring, and people living far longer than ever before, demand for social housing in the UK is only going to grow.

This type of investing is already common with major American and Canadian pension funds, and although British funds may not be able to invest so heavily due to their smaller sizes, they could be missing a trick if they do not look at social housing investment.

- Tuesday 15 February 2011

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