Government backs stock market flotation for private rental investment trust

Helen Cahill
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Private rental homes in Norris Green, Merseyside (Source: PRS Reit)

A real estate investment trust dedicated to the private rental sector has announced its intention to float at the end of May.

PRS Reit is looking to raise £250m when it floats on the main market and has received backing from the government. The Homes and Communities Agency (HCA) is taking a 10 per cent stake in the trust.

The trust enables investors to benefit from a growing trend in the UK housing market - long-term private rents. It will invest in new-build family rental homes across towns and cities in England.

Read more: The housing white paper's big winners: Housebuilder and estate agent shares

The government first stated its intention to back the private rental sector in its housing white paper. The growth of managed rental housing provides an alternative to part-time landlords, an industry that has faced considerable regulation due to the problems landlords have been creating for renters and the property market more widely.

In addition, the government has pledged to diversify the tenures available on the UK housing market, arguing there are not enough housing options for those who do not want, or cannot afford, to buy a house outright.

For institutional investors, the private rental sector provides dependable returns over a long period.

Read more: The housing white paper's big winners: Housebuilder and estate agent shares

Stephen Smith, chairman of PRS Reit, said: "Demand for high quality, professionally managed new rental homes, especially family homes, is strong and growing. This reflects the structural undersupply of homes in the UK and the growth in the private rented sector."

PRS Reit is targeting returns of 10 per cent per year for investors and a dividend yield of six per cent per year.

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