Pension Assets and Housing

Pension funds often represent the largest portion of domestic savings and, therefore, offer a substantial source of capital for investment in housing. They, unlike banks and some other large institutions, fall into that small group of asset holders with long-term investment horizons, a natural counter-point to the needs of borrowers for housing, who seek long-term finance. For their part, the trustees and managers of pension funds tend to be conservative in their approach to fund investments, protecting member assets in support of their retirement. While, in many jurisdictions, there are regulatory constraints to pension funds investing in the housing sector.

Pension funds can invest directly in housing development projects; take an equity stake in finance institutions that specialise in housing finance products; providing debt for mortgage and housing development lending; and invest in asset-backed securities, such as mortgage-backed securities (MBS), where these exist. Other ways to leverage pension savings for housing include permitting fund members to use their savings as collateral for housing loans obtained from a third party, and allowing members to draw on their pensions to use on housing-related expenditure.

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