Housing fund aims to raise £150m for new build projects north of the border
A Scottish local government pension scheme has committed £30m to a new fund that aims to build 1,000 affordable and private rented homes north of the border.
Falkirk Council Pension Fund has announced that it will be the cornerstone investor in The Housing Fund for Scotland, which is being set up by Hearthstone Investments.
The specialist residential property investment company aims to invest up to £150m in building more than 1,000 new affordable, social and private-rented sector homes across Scotland where the rate of new housing supply is still significantly (42%) below pre-recession levels.
Christopher Down, chief executive officer of Hearthstone, said the company was holding discussions with a number of other Scottish pension funds about participating in the fund. Hearthstone also plans to set up similar funds that would provide opportunities for council pension schemes elsewhere in the UK, which hold £200bn worth of investments between them, to invest in residential property.
The housing fund aims to generate inflation busting returns by investing in affordable and private-rented property within Scotland, as well as bonds issued by large housing associations. It will run initially for ten years after which investors will have an option to extend.
Hearthstone predicts a considerable inflow of pension fund capital into residential housing projects over the next five years due to the anaemic returns on offer to investors from bonds.
Down said: “Residential property throughout the UK remains a strong long-term investment, with significant scale, low volatility and attractive demand/supply characteristics.”