Pension funds could kick-start house building
A three-fold increase in new homes could be built in the UK every year on the back of local authority pensions funding, according to a report released today (Friday 26 October) by the Future Homes Commission (FHC).
The RIBA-backed Future Homes Commission's report Building the Homes and Communities Britain Needs calls for five major changes that will lead to 300,000 homes being built each year:
- The setting up of an independently managed £10bn Local Housing Development Fund, to kick-start the effort to build new mixed tenure communities. The fund would be financed by the largest local authority pension funds pooling 15% of their assets to invest in rental and shared-ownership housing. The fund would be owned by the contributing pension funds.
- A greater focus on design in all new homes, ensuring they meet current residents’ needs, making them fit for future generations, and thus attractive to UK and international institutional investors so that local authority pension funds can recycle their investment once a community has been established.
- A more consumer-oriented housing market, with reliable, comprehensive information available to people when making the most important financial decisions of their lives.
- A lead role for local councils, using the new powers now at their disposal to lead the creation of sustainable communities to meet local housing needs and ensure a decent return of their investments.
The report is published as new housing registration figures from NHBC have revealed a flat housing market across the UK. In total there were 28,151 new homes registered across all sectors for Q3 2012, compared to 30,039 in the previous year, representing a drop of 6%. Broken down, the private sector experienced a 7% decline, with social housing numbers down 5% against Q3 2011 figures.
However, the latest Q3 figures revealed a 9% increase in registrations compared to Q2 (April-June; 25,798).
Speakers at the launch of a Smith Institute report this week – Local Authority pension funds:investing for growth – highlighted the cautious approach trustees of pension funds take to new forms of investment including housing and infrastructure.
Ian Greenwood, chair of the Local Authority Pension Fund Forum said: “Any model for investment has to be clear that its adding to our risk profile – and providing a rate of return well above RPI. You shouldn't lose sight of the fact that 20% of the population has some stake in local government pension funds and all politicians have to take that into consideration. You can't mess with these funds, and local authority pension funds can’t be taken for granted.”
Chair of the Future Homes Commission, Sir John Banham, said: “There is no better time to tackle the UK housing crisis. After a year-long national inquiry, the Future Homes Commission has concluded a housing revolution is entirely possible and will lead economic growth. We need to increase massively the number of quality homes being built for many years to come, but also to develop communities which enhance the quality of life for both new residents and those living in existing communities nearby. All this has to and can happen without any additional government funding.”