Could the Reserved Investor Fund help towards solving the housing crisis?

Could the Reserved Investor Fund be a piece in the puzzle towards solving the housing crisis?
 
"Housing is absolutely essential to human flourishing. Without stable shelter, it all falls apart." – Matthew Desmond
 
The UK’s housing shortage is a serious issue that continues to affect millions of people each year. We are all too familiar with the financial challenges the affordable housing sector faces when building new homes. The UK government's target to build 1.5 million homes over five years brings promise, alongside the obvious questions around funding which need consideration. The cost of land, materials and labour have all increased significantly in recent times, which coupled with much higher interest rates, has made it more expensive than ever to build new, safe, good quality homes.
 
Residential developers seeking investment have experienced the double-whammy of an increasingly difficult margin on private/public development initiatives (where it is increasingly difficult to make a profit for the developers and their investors whilst achieving the affordable housing aims) in what was already a challenging UK real estate funds market. Until now, the UK did not necessarily offer a full range of attractive fundraising options for private placement funds investing in public/private initiatives which could be tax efficient and robust enough for a range of investors from LGPS and DC schemes to family offices, without resorting to offshore structures, complex feeder/holder structures, and/or disproportionate set up and running costs. The overall picture could be said to leave developers stuck between the rock of a decreasingly attractive investment opportunity and the hard place of the UK real estate funds market for raising funds.

This, notwithstanding that affordable housing as an asset class could be very attractive to investors if the margins are right, due to the steady long-term rental income, the fact that the sector is well-regulated and the social benefits it offers. 
 
Enter stage right the new Reserved Investor Fund (RIF), an entirely new unauthorised fund structure signed off by Parliament in March. As a simple contractual fund structure requiring only an alternative investment fund manager, a depositary and a trust deed, there is now a new option for raising and deploying funds which, with significant savings in relation to tax efficiency, costs and administration at the top end, could be a piece in the puzzle in increasing the attractiveness and viability of investing in these types of public/private development projects. By decreasing costs at the top end, these funds could help maximise tightened returns from the development itself. More funding could enable the delivery of more homes. It could also support the delivery of much needed affordable housing and provide funding for regeneration projects.
 
In March 2025, Mills & Reeve hosted a thought leadership dinner on the RIF. You can find out more about the RIF and the thoughts arising from the dinner here. If you’d like to hear more about how the RIF might apply to your projects/work, you can contact Dona Ardeman or Namita Matkar. 

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