Housing the homeless: Charity launches property fund

http://www.guardian.co.uk/money/2012/feb/29/homeless-charity-launches-property-fund

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Homelessness charity Broadway is launching the first property fund designed to buy accommodation for homeless people.

The fund will support the charity's Real Lettings operation, which rents and then sub-lets affordable accommodation in the private rented sector to people who don't qualify for social housing but are ready and able to maintain a tenancy.

Real Lettings leases 220 flats and has housed a further 4,000 people in London, but its chief executive Howard Sinclair said the number of homeless people has already risen by more than a fifth in the past year and is expected to rise still further as housing benefit cuts take effect during 2012.

"There will be an increasing need for more homes as the cuts continue to take effect. The fund provides a smart solution, with a yield for investors, while enabling Real Lettings to expand its housing stock," he said.

The fund, run by specialist investment firm Resonance, will finance a further 250 one- and two-bed flats, mainly in outer London boroughs.

Resonance aims to create a seven-year, close-ended fund that provides returns of 5% a year. It will bulk buy units from a panel of five to 10 developers and landlords, then guarantee 100% occupancy and take on management and maintenance risk helped by residential developer United House.

Daniel Brewer, managing director of Resonance, said the fund would buy four to six properties at a time, comprising no more than 20% of a development to avoid ghettoisation of Real Lettings' clients. The biggest risk to returns would be a fall in retail property prices and further cuts to housing benefits by the government.

Resonance is aiming to raise £15m this summer and a further £30m in 2013 from housing associations and charities, with plans to increase the fund to more than £100m by 2014.

The firm is in early discussions with a number of charitable foundations and housing associations who might have supported homelessness initiatives in the past using income from their investments.

These trusts are considering, under new Charity Commission guidelines, using their endowments to achieve a commercially risk-adjusted return while also delivering a clear social impact. Brewer says Resonance will also start investigating the possibility of making the fund available to ordinary private investors this autumn.