Inside Housing today.
The unnamed small south east based housing associations will create an aggregated social housing real estate investment trust (REIT), which will see investors trade shares and hold the associations to account over the management of their stock.
The housing associations plan to use the £500 million raised to invest in building homes and buying section 106 sites.
In the government's March 2012 Budget it announced that it would undertake a consultation to explore the role REITs can play in supporting the social housing sector. This may offer social housing landlords an alternative source of financing to fund their future housing developments.
The consultation also examines proposals, and their associated risks and benefits, for investing in real estate investment trusts. The consultation closes on 27 June 2012.
Guidance on Real Estate Investment Trusts provided by HM Revenue and Customers describes a REIT as a 'vehicle that allows an investor to obtain broadly similar returns from their investment, as they would have, had they invested directly in property'.
'The vehicle is a limited company (or a group of such companies), required to invest mainly in property and to pay out 90% of the profits from its property rental business as measured for tax purposes as dividends to shareholders.'