Building Homes for Generation Rent

A low-risk income return of 4.7 per cent should be achievable for institutional investors putting money into the private rented sector – a move which could also help solve Britain’s housing crisis for families on modest incomes.

Building Homes for Generation Rent identifies a £140 million property portfolio, made up of almost 800 rental homes around the country which are already being built or planned by not-for-profit housing providers, and models in detail the profit that a commercial stake in them would return. It shows that it should be possible to achieve a 3.9 per cent return on incomes alone, rising to 6.5 per cent or more on total returns – which include both income and rising capital values, at modest inflation. By selecting developments with the highest returns and managing them more efficiently, the income return could be pushed up to 4.7 per cent and the total return to 7.3 per cent.