Affordable housing provider Rentplus has secured up to £70 million funding to support the delivery of thousands of new rent-to-buy homes
The funding will help Rentplus deliver 580 homes out of its initial target to build 5,000 new affordable homes by 2020.
BAE Systems Pension Funds Investment Management Ltd (“BAE Pension Fund”), through two of its pension funds, has approved an initial £35 million private placing of an inflation linked bond for the Plymouth-based company with the possibility of an additional £35 million commitment.
Rentplus, which currently has a national pipeline of 8,500 homes, will use this funding to help tackle the UK’s housing affordability crisis. The company provides aspirant home owners with privately funded intermediate affordable rent-to-buy housing, with real prospects to achieve ownership benefitting from affordable rents (80% of open market rent) and a 10% gifted deposit from Rentplus.
The Rentplus model provides its tenants with the option to purchase their home after five, 10, 15 and 20 years of their tenancy period, with all homes sold after 20 years. Rentplus aims to replace all homes that are sold in order to maintain the level of affordable housing in the area at the required level.
Rentplus requires a total of £1 billion of institutional and pension fund investment in order to deliver its ambitious 8,500 pipeline and is in conversations with a number of other potential funding partners.
The funding from BAE Pension Fund is the first to contribute to that target. The Rentplus model provides steady growth through the virtuous circle of investment in a local area (homes being sold after 20 years and then replaced by Rentplus) and the mixture of rental income and capital return.
Numis Securities Limited advised Rentplus on the raising of this funding. Savills plc acts as property adviser to Rentplus.
John Gildersleeve, chairman of Rentplus, said: “As is widely recognised, the current affordable residential property market model in this country is not working. Home ownership is overwhelmingly the first choice across the UK, however 48% of households in the 25-34 age group currently live in the private rented sector compared to 21% in 2003-04.
“The primary reason is lack of affordability, the driver of which is lack of affordable housing supply. We must therefore fix the model and innovative solutions such as Rentplus’s intermediate rent-to-buy are absolutely crucial in a climate where rents are increasing and deposits required to buy continue to climb – reports earlier this year put the average deposit to buy a home at more than £80,000. Our rent-to-buy model is designed to solve both of these issues.
David Cryer, portfolio manager at BAE Pension Fund, said: “We are delighted to provide the first tranche of institutional funding for Rentplus. Rentplus offers a great solution for local authorities and housing associations to provide an affordable housing product – we have a strong commitment to both sectors and therefore this is an excellent fit for the pension fund.
“Having worked closely with Rentplus to create a funding strategy to suit both sides, we look forward to continuing our excellent relationship.”