So much more than Mayfair: Housing investment in the UK
By: Bedford Row Capital
Tags: Investment Opportunities, London, Social Care, Gcc

Driving around Central London, there is no shortage of examples of GCC and Asian countries snapping up prime properties. Hoardings on building sites promote the investment of Qataris, Malaysians and Singaporeans and these are just large-scale public developments. Private transactions abound for prime London housing.

Nothing wrong with this, the trend will continue irrespective of Brexit; London is London and will always be attractive. Few can argue with Samuel Johnson: “…when a man is tired of London, he is tired of life; for there is in London all that life can afford.” But what if you cannot afford it?

This is a question which the government should have asked before the last Sukuk facility was issued. Prime Minister Boris Johnson has been speaking about the “crisis in care”. The availability of care homes, including places for those with severe and lifelong disabilities, is of poor quality and there is little that the government can do to solve this problem.

There is also an annual shortage of approximately 30,000 places which require social housing (provided by the councils but supported by the government) and this list is growing every year. Recent estimates are the total backlog may be as high as 300,000.

In other words, there is a demand for new housing supported by the government for new homes to be provided to something like 300,000 people. The problem is as large as it sounds. The UK government’s pledges for sustainability and commitment to environmental, social and governance seem to be overlooking a fundamental domestic need for social housing.

The provision of care homes (sale and leaseback to operators) has historically been an area where Shariah compliant financing has been used. From the late 1990s, early offerings attracted a wide range of Kuwaiti investors to the UK care market.

Unfortunately, there have been a number of problems along the way. Recent innovation by Montreux has seen a Shariah compliant fund offering which continues to attract new money into an unusual structure which offers some way for investors to support and participate in the growing demand for care.

Social housing, however, remains a huge issue (not just in the UK). The possibility to attract funding in this market is that most plans entail construction risk and coming from the perspective of how to get out of landbanking (ie the next phase in generating a return).

Why not use a more Shariah compliant sale and leaseback model which worked well for care homes? A social housing Sukuk facility could find wide appeal; sale and leaseback to release capital which could then be used to build new homes, government-backed cash flows and most importantly, a definite and measurable outcome — shorting the queue for decent housing.

Other governments have issued impact or green Sukuk; perhaps the UK needs to admit that there are better ideas of what to do with the next government Sukuk (if there is one). It is such a significant issue to solve that Islamic finance investors could play a significant role in impacting the future of so many low-income Britons.

For further information contact:

Dr Scott Levy, CEO of Bedford Row Capital

slevy@bedfordrowcapital.com

This article was first published in IFN Volume 18 Issue 26 dated the 30th June 2021.