Investment in Property Consultation
06/04/04
The 'Promoting More Flexible Investment in Property' consultation document seeks views on how a new vehicle for investing in property might be structured in order to meet the Government?É?í?Ǭ?s objectives to encourage an efficient and flexible property investment market.
The consultation follows on from Kate Barker?É?í?Ǭ?s recommendation that the Government should consider the introduction of a vehicle based on the US Real Estate Investment Trust (REIT) model. Although the Barker review focussed on housing supply, the model being proposed, Property Investment Funds (PIFs), could cover commercial, as well as residential property.
The consultation paper acknowledges that our private rented sector is small, when compared to the US or most European countries and that it includes some of our ?É?í?Ǭ¨lowest quality housing stock?É?í?ǬÆ.
Along with a number of broader objectives linked to increasing efficiency, the consultation therefore also aims to introduce an investment vehicle that helps to raise standards in rented housing and ?É?í?Ǭ¨stimulate greater development activity in the residential market?É?í?ǬÆ.
Crucially, PIFs are unlikely to develop property themselves, as a majority of their income would have to be returned to investors. The Government assumes that the development industry will build more to meet the extra demand created by this additional investment.
It is likely that they will be listed on the stock exchange, with small retail investors owning the majority of the company. The PIF itself would not have to pay Corporation Tax (assuming various conditions were met) but shareholder dividends would be taxed at the investor?É?í?Ǭ?s marginal rate.
Views are specifically invited on the following issues:
- Property management arrangements ?É?í?Ǭ± should they be managed internally or externally?
- The proportion of income that should be returned to investors
- How PIFs can best be structured in order to ensure a better quality of stock
- Should there be restrictions on the development and investment activity of a PIF?
- How PIFs can ?É?í?Ǭ¨deliver high quality residential property for the entire range of rented accommodation?É?í?ǬÆ
CIH Response:< br /> CIH recognises the need for higher standards in parts of the private rented sector and believes that an increase in the overall supply of rented homes (both absolutely and proportionately) is necessary to tackle housing need and help correct our current tenure imbalance.
CIH strongly welcomes the Treasury?É?í?Ǭ?s agreement on these issues. Our response will focus on how they can best be achieved.
Possible suggestions could include::
- Requiring a percentage of a PIF?É?í?Ǭ?s investment to be in residential property in order to encourage greater investment in this sector
- Offering greater incentives to encourage investment in rented residential property at below market rates, to accommodate the spectrum of housing need. Otherwise, market forces will ensure the best available return and affordable housing will be bypassed
- Offering greater incentives for bringing long term empty properties back into use
- Restricting the management of certain residential properties to landlords who are registered with the Housing Corporation.
We will explore alternatives in achieving our stated objective and welcome further suggestions from members. Please do not hesitate to contact us with any views or enquiries.
Contact Officer: Mark Gibson (024 7685 1756 or mark.gibson@cih.org
Any comments would be welcomed by: 2 July 2004
Deadline for response to sponsoring agency: 16 July 2004