1. ………………………………………………………………………………………………………………………………………… PRS - its the Future CIH Annual Harrogate Conference 2011 Wednesday 22 nd June 2011 Louisa Darian ……………………………………………………………………………………………………..

2. ………………………………………………………………………………………………………………………………………… On low-to-middle incomes who are largely independent of state support Face unique – and often overlooked – challenges because too rich, too poor Low-to-middle income: the RF concept ……………………………………………………………………………………………………..

3. ………………………………………………………………………………………………………………………………………… Low-to-middle income: profile ……………………………………………………………………………………………………..

4. ………………………………………………………………………………………………………………………………………… Home ownership is moving out of reach 16% 44% 60% 50% 32% 18% 43% 67% 77% 65% 42% 27% 0%10%20%30%40%50%60%70%80%90% 16 to 24 25 to 34 35 to 44 45 to 54 55 to 59 60 to 64 Figure 2: Households owning their home with a mortgage by income group and age of head of household: UK 2008-09 Low earners Higher earners

5. ………………………………………………………………………………………………………………………………………… Increasingly reliant on PRS to provide a long-term home …………………………………………………………………………………………………….. Owned Private rented Social rented Tenure mix Low-to-middle earner households under-35 1978198819982008

6. ………………………………………………………………………………………………………………………………………… Why PRS? Substantial supply of houses needed to address affordability – 240,000 built per annum would still mean prices at 8 times earnings by 2016 Mortgage market unlikely to recover to what it was £4 billion cut to social housing grant

7. ………………………………………………………………………………………………………………………………………… What role for PRS? Delivering new homes to meet need and tackle affordability – Rents rose by 8 per cent in the last year in London – 65 per cent of LMEs in London could not afford LHA rates Providing a long-term housing option: – Quality product – Greater security – More control – Opportunities for asset accumulation

8. ………………………………………………………………………………………………………………………………………… How can institutional investment respond?

9. ………………………………………………………………………………………………………………………………………… Source: IPD pan European index 2010 Delivering new homes...

10. ………………………………………………………………………………………………………………………………………… Providing a different product Potential to deliver greater security of tenure – 10 year contracts Professional management Below market/ LHA rents in London and SE Small equity stake in fund for tenants

11. ………………………………………………………………………………………………………………………………………… Total returns there... IPD: results for year ending 2009

12. ………………………………………………………………………………………………………………………………………… Barriers well cited Lower income returns to commercial eg: – Maintenance – Voids/ shorter tenancies Scale Reputational risk Tax

13. ………………………………………………………………………………………………………………………………………… New models emerging to address old problems Public land invested into JV Reduced/ lower levels of S106 LA/ provider guarantees rents Not held in perpetuity for rent Other things that could help – SDLT changes reduce transaction costs – REITs

14. ………………………………………………………………………………………………………………………………………… What does this mean for LAs? Good investment at time when land prices low Deliver affordable housing to local people Relieve pressures on social housing list Deliver jobs But requires some prioritisation of LME groups And wont work everywhere – where land prices high/ unsuitable for residential

15. ………………………………………………………………………………………………………………………………………… Next steps.. We are in the process of writing up more detailed findings Working on a model that we can present to investors in September For more info: louisa.darian@resolutinfoundation.org www. resolutionfoundation.org