HCA encouraging property investment

Friday, 1 May 2009 2:51 PM

The Homes and Communities Agency (HCA) had today launched a new initiative to encourage investors, such as pension funds, into the private rented sector.

The Private Rented Sector Initiative (PRSI) aims to provide an opportunity for low-risk investment, as a part of the government's response to the Rugg review.

The PRSI will target previously un-sourced investors, such as pensions funds and overseas investors; in a bid to "kickstart stalled schemes and lead to a significant increase in high quality new homes for rent".

Sir Bob Kerslake, chief executive of the HCA, said: "To date, achieving scale has been one of the main barriers to attracting institutional investors into the housing sector. We believe there is an opportunity now for the HCA to work with developers and housebuilders to offer a pipeline of projects for the PRSI, which could result in a positive outcome for all stakeholders.

"But it is only potential at this stage. We will engage with the private sector to develop a market driven proposition which is attractive to investors. Projected rental yields and the current market suggest that the time is right, and that is why we are engaging with the market to develop the proposition further."

The focus will be to provide new homes for rent, with potential to consider recently built homes as 'seed assets', with the investment return profile primarily income focused.

The British Property Federation (BPF) has called the initiative a "major lobbying victory".

Liz Peace, chief executive of the BPF, said: "This paves the way for a new kind of private renting that could support new development as the housing market recovers and offer the public real quality and choice in private renting, at little or no cost to the taxpayer.

"The task now is to stimulate interest in the HCA's proposals, encourage some innovative bids and ensure that we create some attractive proposals that provide solid returns for investors and more importantly, tenants. To make this work, we do need to reflect on the different financial structures of private rented housing, ensuring that we do anything we can to draw in this vital new funding."

Development risk for schemes supported by any new investors would remain with the housebuilders, it is assumed, with PRSI providing a source of pre-sales for projects with suitable product.

John Bowles, head of development and residential consulting at Atisreal, said: "The progressive reliance that successive governments have placed on private developers to deliver affordable as well as private market housing (through particularly the planning system) means that, in the present circumstances, there is a massive under-delivery of housing which is likely to persist for at least the next three to four years.

"It is very encouraging to see the HCA leading this particular initiative - if the right framework can be created to attract institutional investors to enter the private rented sector on a large scale, the opportunity really begins to present itself for us to leave the late 20th Century housing model behind to a more diverse and sound housing sector better tuned to our modern needs and society."

However, Louise Cuming, head of mortgages at moneysupermarket.com, has said it is first-time buyers, rather than tenants, who need to be helped by the government.

She said: "Instead of helping to boost the rental market, we should be working towards satisfying the demand for home ownership. If first-time buyers could be helped to get on the housing ladder, it would be a far more effective way of supporting the housing industry than concentrating on financial incentives for large institutions to build rental properties.

"However, new property builds (or even completion of part built properties) has slowed right down whether the properties are for rental or sale. If pension funds can be persuaded to put money in and kick start house building in the UK this will be a step in the right direction for home buyers, renters, and the construction sector."

Sarah Garrod

Tags:
• uk property news