Access to decent housing and basic infrastructure – a social opportunity
If the coronavirus crisis has had one virtue, it is that of putting societal priorities into perspective. The health of individuals has been established as a non-negotiable value, states have attempted to preserve – as far as possible – the jobs and resources of individuals, and companies have sought to ensure the safety of their employees and the maintenance of their value chains.
The growing concern for environmental and social issues has found an accelerator in this pandemic, while the debate around individual and collective responsibility has helped shape the public and private response.
This period has also clarified the value proposition of responsible finance and its role in society. There are many sectors, topics and philosophies that have had to be reassessed – access to housing is a case in point. For an investor, it is possible to act with a double objective: To allocate capital for a potential financial return while having a positive and measurable impact on social issues.
The emergence of the middle class may benefit part of the real estate market
In the classic pyramid of human needs set out by the US psychologist Abraham Maslow, housing sits squarely in the first tier: A fundamental need and a significant part of any household budget. Even before the COVID-19 crisis, housing costs had risen substantially in countries belonging to the Organization for Economic Co-operation and Development. This was especially so for renters, as the supply of affordable housing had failed to keep up with demand.
Finding affordable housing can be difficult, especially for people with low or unstable incomes, for young people, families with children and the elderly. This has required action. As an example, to prevent the middle classes from being forced to leave city centers, the German government is trying to put in place urban policies aimed at controlling or even capping the price of rents in certain areas of the country.
TAG Immobilien is a listed German real estate company operates in the low-rent segment. The company has marketed on its success in the German market to expand to new markets, such as Poland.
In Japan, real estate prices are high, and the ratio of the price of a house or an apartment was 8.1 (Significantly above global averages) according to Tokyo Kantei, a Tokyo-based real estate market research firm. We think this offers an environment for companies specializing in the renovation and marketing of older properties at affordable price. We believe some These houses are generally intended for a segment of the population whose income or pension is no longer increasing and who therefore wish to adjust their expenses as closely as possible to their needs.
In the US, one example is Sun Communities, which aims to provide quality, low-cost housing in the southern and Midwest regions where the demographic outlook for low-income families and retirees remains favorable and Sun Communities is expanding its community of mobile homes and motorhomes across the country
- In the case of a purchase, the cost of a mobile home represents more than two times the median annual US salary, while a traditional house will cost about seven times the median salary.
In emerging countries, our approach has been limited by an investment universe that does not yet fully meet the impact criteria that we have set for ourselves, with listed real estate companies often are positioned in high-end segments.
To respond to this social issue of housing, our conviction is that we must focus more on the business models of companies than on the assets they own or market. Access to housing can therefore be a real driver of social progress and growth for companies that take these issues head on.