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Property industry calls for fresh look at TIF and reit reform to bolster UK pension fund investment

The property industry has strongly backed government plans to attract pension funds to invest in infrastructure, but warned the overall scale of the UK’s infrastructure challenge is beyond what can be afforded by the public or private sector and that innovative solutions such as tax increment financing (TIF) need to be implemented as soon as possible.

The British Property Federation also urged government to examine whether reits (real estate investment trusts) could provide a better and simpler vehicle for investing in infrastructure. At present, reits are able to invest only in property and rental income, but further reform of the sector could open up the prospect of infrastructure reits, mortgage reits and potentially other sub-sectors such as hotels emerging here, as they have in other countries including the United States.

Announced ahead of tomorrow’s Autumn Statement, the infrastructure programme will see two-thirds of Chancellor George Osborne’s £30billion investment in infrastructure raised from pension funds, in a bid to stave off recession.

The BPF welcomed the move to promote and prioritise capital investment in infrastructure as such spending has a large multiplier effect across the whole economy. But with reliable estimates putting the UK’s infrastructure needs at £500billion between now and 2020, the UK faces an infrastructure black hole unless other means to encourage investment are put in place.

Liz Peace, Chief Executive of the British Property Federation, commented: “Welcome though the government’s announcement is, alternative funding is needed to unlock stalled regeneration schemes across the country and generate much needed economic growth.

“This means the government needs to move rapidly to implement TIF, which can fund the cost of the upfront infrastructure investment needed to make many regeneration projects work. One of the unique benefits of TIF is that it links infrastructure investment to very specific broader private sector investment because it allows payback in the form of rates income from new development. 

“Reits could provide a further means of deploying infrastructure investment if the government is willing to explore a possible widening of the definitions for “good” assets and income beyond property and rental income – and it may make sense to look at a range of options in that space for further reit reform.

“The government might even consider the merits of a national infrastructure investment bank capable of attracting wider private investment, something the President Obama is actively exploring in the USA, and incentivising local authorities to invest more in the infrastructure through the wider use of municipal bonds.”

ENDS  

Patrick Clift, Media and Public Affairs Manager, on 07834 439 505 or at pclift@bpf.org.uk

Paul Sweeney, Media Officer, on 07841 732 194 or at psweeney@bpf.org.uk

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