Happy Returns: The Individual Investor as a Source of New Capital for Rented Housing in a Time of Changing Social Welfare Structures

Abstract

Recent changes in the ideology of welfare have led to reductions in the scope for some individuals to play their desired part in funding the social welfare system through taxation. At the same time, there is a widely held view in the housing world that over the next 20 years the supply of rented homes is going to be too low to meet rising demand. Prospects for significantly increased public investment in new rented housing look slight. Private finance is now seen by government as the preferred source of capital funds for the creation of extra housing, not only in the private rented sector but also in the housing association sector, and perhaps in future in the local authority sector. However, the financial institutions-the most often quoted source of private finance currently appear reluctant to take on this role, at least in the privately rented sector. Presently, little attention is being given to the individual, as opposed to the institutional, investor. This paper-based on evidence gathered in a national survey of individual shareholders in companies listed on the London Stock Exchange-explores the possibility of individuals becoming more involved in investing capital in rented housing, both private and public. It suggests that there is some interest in such investment among current shareholders who have considerable assets. More specifically, it argues that there is a group of ethical investors who would be willing to invest in rented housing, some of whom may be willing to accept a lower rate of return on rented housing than on competing investments. Together these groups (and other 'socially disenfranchised' citizens) may offer a source of considerable capital to complement that which institutional investors may provide. If such capital is to be forthcoming, policies are required which address their requirements. A number of suggestions are put forward.