Affordable housing is becoming more of an institutional product as investors wake up to the supply and demand imbalance, delegates heard at Real Asset Media’s European Residential & Affordable Housing Investment Briefing, which was held online recently.
“There are many differences among resi markets in Europe, for example the rental share is 50% in Germany and 24% in Spain,” said Hilke Nijmeijer, portfolio manager, CBRE European residential impact fund, CBRE Global Investors. “But the common factor is that there is a shortage of affordable housing in all cities.”
With the urbanisation trend continuing, the lack of supply is becoming a long-term challenge.
“Italy has been an absent player so far,” said Manfredi Catella, founder and CEO, Coima. “There are 12 affordable units per 1,000 homes, much lower than the EU average. Germany has 22. The need is great, so there is a real opportunity to start an institutional approach, develop to core a product that doesn’t exist in Italy.”
Introducing institutional investors and professional management would be a game-changer for the market, but investors need to negotiate regulatory uncertainty and a political minefield.
“There’s no question that we need more and better supply, but it is difficult to predict local regulations,” said Nijmeijer. “It’s still possible to get stable returns, but regulation represents a constant risk because it is being increased and toughened all the time.”
Affordable housing and rent control ‘explosive’ in some cities
In several European cities, affordable housing and rent controls have become an explosive issue.
“Affordability has taken on a populist aspect,” said Xavier Jongen, managing director, European residential, Catella. “The system needs to be re-thought. Everyone has tunnel vision and short-term fixes. It’s time to experiment, get all stakeholders together and try to find a long-term solution to a decades-old problem.”
The need for affordable housing adds another layer of complexity to resi regulations, which are already difficult. Much depends on local authorities’ attitudes.
“Urban regeneration is a complicated activity that requires collaboration with the authorities,” said Catella. “The industry is changing but the public sector is much slower. Milan’s had a good vision, the regulation and planning department are performing well, at a European level, but other Italian cities are not doing so well.”