Big investors to be encouraged into private rental sector

Friday 20th April 2012

The property industry is calling on the Government to explicitly encourage big investors to back ‘build to rent’ schemes.

The Montague Review, out to consultation, is looking at whether there are barriers preventing institutional investment in the private rented sector, on the basis that more rental accommodation is needed than the existing buy-to-let sector – which is mostly made up of small landlords – could possibly supply.

A response has been submitted jointly by the British Property Federation, Association of Real Estate Funds and the Investment Property Forum.

It says that big investors could be interested in the sector if there were legal S106 agreements in place, ensuring that all units on a development would be rented out for at least ten years and not sold.

The response also calls for this type of housing to be recognised in the National Planning Policy Framework, so that local authorities could meet housing need through ‘build to rent’ schemes.

Andrew Stanford, of the British Property Federation, said: “There is interest among institutional investors to invest in housing, but barriers such as scale and low net income yield remain.

“If we want to attract the sort of sums that will really make a difference to housing supply, then we need some support via the planning system to deliver a different rental product and support the yields that institutions seek.
 
“This would be a cost-free way for Government to boost housing supply, and would actually be profitable for them if they invested public land.”
 
John Cartwright, chief executive of the Association of Real Estate Funds, said investment firms could create new “large-scale, residential investment products for the ordinary man or woman on the street, an easier and more diversified option than buy-to-let”.

He added: “We are aware that a number of well-known firms have expressed serious interest in this sector.

“And with younger people being forced to rent while they save for that first deposit, residential funds could give them the opportunity to invest in the housing market and gain potential returns before they are in a position to buy.”