Institutional investors to play a greater role in the supply of affordable housing

Local governments worldwide need to provide more financial incentives and other concessions if institutional investors are to play a greater role in the provision of affordable housing, according to Michiel de Bruine, Director Dutch Residential Investments and Gijs Plantinga, Director North American Investment, in an article in international real estate publication PERE on the growing role that institutional investors are playing in this segment.

Over the past decade, affordable accommodation has attracted increasingly more private capital aimed at building real estate that serves society and, at the same time, generates institutional returns. But supply of affordable housing is still nowhere close to matching the demand due to a prohibitive mix of regulatory, political and financial roadblocks, Michiel and Gijs agree.

A closer partnership between commercial players and local governments can help bridge the gap, Michiel said.  “It helps, for example, when municipalities lower land prices or when restrictions keeping homes in the mid-rental segment are eased to 20 instead of 25 years. Such concessions help us to reduce our risk and enable us to accept lower returns.”

Bouwinvest focuses worldwide on affordable housing and last year the company’s North America Mandate headed by Gijs also ploughed funds into the segment in that region. Having a partner specialising in the U.S. government’s Low-Income Housing Tax Credit (LIHTC) programme was key, Gijs said. “That tax benefit had a positive impact on our initial returns and helped us to make the investment work for our shareholders, mostly Dutch pension funds."

Read the full interview on the PERE website.