A £200m investment fund designed to accelerate the development of new high quality homes for private rental purposes by cutting the risk to developers was launched by housing minister Mark Prisk on 20th December 2012.
The Build To Rent Fund will provide equity or loan finance for a range of viable projects in areas of England where there is both local demand and support for new private rental housing such as Leeds.
The focus will be primarily on larger proposals with 100 or more new privately rented units, aiming to accelerate development and attract new investors into the private rented sector. The new rental properties would be publicly financed, covering costs such as land, construction or management costs, then let out and managed. The developer would then refinance or sell on its interest and repay the money back to the Government. It is hoped that this arrangement will give developers, who would otherwise be building new homes for sale, the freedom to build homes specifically for the renal market with confidence.
Management companies also have the opportunity to invest in these new rental homes as well as managing them, opening up new avenues for potential business.
Pat Richie, chief executive of the Homes and Communities Agency, said, “The private rented sector is already home for a significant number of people, including young professionals and families, and demand for this type of housing is rising. We want to see people having the opportunity to choose their housing options, of which private rented is a growing and vital part.
“This programme will increase and accelerate the building of quality and well-managed private rented homes, as well as encouraging long-term institutional investors to the sector which will in turn unlock greater capacity in the housing market.”
Housing minister Mark Prisk said, “A healthy rental housing market must have a broad range of choice across the board. But for it to grow and develop, we must first attract new investors. The Build to Rent fund will support this, helping to build homes specifically for private rent and breathing new life into the sector.
“And by driving this market in housebuilding, the fund will also help create new jobs, build the homes that families need and local people want, and support economic growth across the country.”
The fund is to run as a single national competition. The Greater London Authority (GLA) is to lead on the assessment Expressions of Interest for London sites. Mayor of London, Boris Johnson, said, “Boosting the number of homes being built in London is crucial to our city’s economic success and this private rent fund will play a vital role in speeding the delivery process up. Investment in London’s housing infrastructure is one of the best ways to deliver much needed construction jobs and economic growth and so I’d like to see some strong bids for the capital coming forward.”
The launch of this new fund marks the first step in the implementation of the Montague report into rented homes, written last summer by Sir Adrian Montague. Mark Prisk said that Build To Rent follows its recommendations and will help address the varying level of quality across the nation’s private rented sector.
Liz Peace, chief executive of the British Property Federation, said, “Part of the challenge of attracting institutional investment into market renting is finding suitable stock to invest in.
“The existence of this fund, and the speed at which it has been put in place, is important and very welcome in illustrating Government support for build-to-rent. “The choice of specific projects, however, will determine its success, and the aim should be to find projects that exemplify build-to-rent and that will act as an excellent catalyst to the wider market.
“If it is to be money well spent then Government must also follow through with the other Review recommendations, particularly on clarifying how the planning system treats build-to-rent. Investors and local authorities want clarity on this aspect of policy, which thus far has not been dealt with in the Growth and Infrastructure Bill or national planning guidance.”
The fund is currently open for bids, the prospectus of which can be found on the Homes and Communities Agency website.
Interested parties have until noon on 4th February 2013 to submit their Expressions of Interest. Shortlisted schemes are expected to be announced in March.