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I suspect that it may be a challenge. Although these changes may make it possible for charities and registered social landlords to choose to become part of a REIT, that might be extremely difficult in practice. The concept of affordable rent is at risk, not just because of this form of investment, but because of the general decline in grant assistance. The cost of building a new home has to be covered from somewhere and, unless costs are driven down substantially, lower grants mean that finance has to be raised another way.
In respect of the more traditional route of raising finance through bank loans, which I have already described as difficult, there is a feeling in the sector that if it is to create the same number of houses on a smaller grant—wherever the additional investment is coming from—there is a question about what the appropriate rent would be to finance such borrowing. If rents are to be raised, a question arises about the degree to which the homes that are built may still be called affordable homes. That might lead to a problem with the Government’s welfare reform programme and the desire to drive down the cost of housing benefit, so a lot of things must be considered.
It would be wrong for the sector not at least to have opportunities to find out whether such a process is feasible. A REIT may work best for the private rented sector rather than the public rented sector.