PRIVATE INVESTMENT IN RENTAL HOUSING

The aim of this paper is to examine the investment record of the private rented sector as a way of understanding the prospects for private investment. A capital-asset-pricing model is used which enables investors, on the basis of the risk characteristics of investing in private rental housing, to quantify the rate of return they might require from investing in this sector. Aggregate data are used to show that in much of Britain fair rents have been greater than the target rate of return identified. It is argued that the reasons for disinvestment, as well as the challenge facing any policy initiatives which set out to attract new capital, are to be found in other characteristics of the sector, such as management costs, political risk, and the relationship with capital values in the owner-occupied sector. It is also argued that these additional characteristics are likely to have less of a negative influence on investment for middle-income, rather than low-income, tenants. -Authors