Housing investment trusts and the returns from residential lettings

This paper assesses the prospects in Britain for investment by financial institutions in private rented housing. The first section describes the previous and the current governments'policies on private rented housing, the policy-measures established to revive this sector of the housing market and their impact to date. The second section describes housing investment trusts (HITs) - a new investment vehicle aimed at attracting financial institutions into the market- and explains where they fit into the policy framework. The third section discusses the evidence about the rates of return currently being achieved by private landlords, including BES assured tenancy companies. The fourth section describes financial institutions attitudes' to investment in private rented housing, including returns required, and the circumstances under which investment may be made. The fifth section presents the results of financial modelling of the returns which HITs are likely to earn. The final section assesses the prospects of financial institutions investing in the private rented sector, including via HITs.