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Disrupting the affordable housing market (misallocations of resources on…
Disrupting the affordable housing market
misallocations of resources on the higher end of the market relative to the lower end of the market
Developer capacity is focused on the high end
Lack of mortgages drive developers to focus on the few cash buyers and those who can qualify for mortgages
Cost of capital only permits for development finance where banks are wary of long term capital as no proven rental market
No institutional Rental Market
The lack of well-established professional property management firms means institutions are wary of investing.
Lack of a large high-quality well-managed portfolio means there is no initial pool of assets for a prospective REIT to take to market. Without this there will never be a residential REIT sector
Commercial banks are not extending long term debt linked to financing rental housing. This means access to capital is mainly linked to short term development finance
Supply is primarily for non green housing units
Lack of demonstration projects to catalyse the mass market for energy and water efficient units
The fund will train professionals, contractors and developers on greening. Through this, the industry will adopt these standards and green units beyond the funds target will be delivered to the market
Set higher consumer expectations for energy and water efficient housing units.
The fund will develop the green housing market by delivering IFC Edge compliant units with a clear demonstration for energy and water efficiency
Scarce and expensive mortgage lending
This prioritizes high-income borrowers who can afford the interest bills and who, in many cases, have a portfolio of assets to act as security
The fund helps address this through its tenant purchase strategy, which enables home ownership for people in the moderate-income sector.
Undeveloped REIT market, primarily affordable housing REIT
Lack of a large high quality well managed portfolio means no initial pool of assets for a prospective REIT to take to market
Demonstrate to asset managers the ability of developing an affordable housing REIT by showcasing an investment grade portfolio of rental housing
Lack of specialised affordable housing asset managers and property managers means no confidence in ability to find well managed portfolios
The market is largely dominated by single landlord buildings which are low quality, poorly managed and highly priced rental units
Consumer expectation in terms of product and sustainable management of the product will be enhanced by providing climate friendly, well located properties with good social amenities