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London
Tenants Federation
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Real Estate Investment Trusts (REITs) Real Estate Investment Trusts are joint stock companies that primarily derive their income from real estate, through ownership, operation, funding or a mixture. Their primary business is managing groups of income producing properties. They are free from corporate tax and pay out high parts of their profits to their shareholders. REITs were introduced in the UK in January '07. They are common in other countries, especially the USA and Australia, investing in both commercial and residential properties, where they have huge portfolios of property without (according to the Real Estate Investment Trust web site) 'the risks and administrative burden of direct ownership' and they are worth hundreds of billions of pounds. The LTF fears that the introduction of REITs here could lead to a massive concentration of financial power and anti-democratic political influence, making housing markets dependent on international speculation bubbles. Evidence from other countries, which we have obtained through our links with tenants organisations internationally give us cause for alarm. In the United States and France, REITs have lead to higher rents and to asset stripping; where the most profitable housing has been enhanced at increased rents, whilst the rest has been left to decay or emptied for redevelopment or demolition. One large private equity fund, the UK based Terra Firma and its housing branch Annington, acquired part of one of the largest German housing companies from energy corporation Eon AG for nearly 7 billion Euros in 2005. It was one of the largest housing deals in German history. Annington/Terra Firma currently own 250,000 flats with mid term goals to own 500,000 and long term goals of owning a million. To achieve this; the company could be looking for other large quantities of housing to add to its portfolio here in the UK. The LTF fears the worst in the capital, where property and land prices are already sky high. Without regulation, the introduction of REITs here could lead to large-scale privatisation, the splitting of rented housing into individual leaseholds and the replacement of social housing with expensive blocks of flats. Evidence elsewhere suggests further consequences could be forced evictions and the loss of social accountability The government in Germany also intended to introduce REITs. Some tenants organisations there have been asking for legislation to control international real estate investment and prevent their encroachment into public housing. With a consortium of 17 housing associations now looking at the feasibility of establishing a REIT, the LTF would like to encourage wider debate and awareness of the issues of REITs. We, like our German counterparts would like to see the protection of both democratically controlled and not for profit housing sectors.
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