Private rented sector
Private rented housing is a growing part of the housing market. It comprises almost 16.5% of all households, or nearly 3.8 million homes in England. The private rented sector offers a flexible form of tenure and meets a wide range of housing needs. It contributes to greater labour market mobility and is increasingly the tenure of choice for young people.
The government wants to encourage a wider range of investors to build houses for private rent. The 2011 Budget introduced changes to Stamp Duty Land Tax which will mean that large-scale investors pay a typical 1% instead of 5% on bulk purchases, as Stamp Duty will be assessed on the average value of individual properties rather than on the overall value of the portfolio.
The Budget also included a range of measures that were introduced in the 2012 Finance Act to support the development and growth of UK real estate investment trusts to make them more suitable for residential investment.
In response to Sir Adrian Montague’s review of the barriers to investment in private rented homes on 6 September 2012 we announced:
- a £200 million fund to provide equity finance to house builders and developers (increased to £1 billion in the 2013 Budget)
- a debt guarantee scheme to support the building of more private rented housing
- a team of private rented sector investment experts to support demonstration projects through the equity finance fund and development and take-up of the new debt guarantee scheme
The private rented sector is already governed by a well-established legal framework and we will not introduce any further regulations. This will ensure the sector is free to grow in response to market conditions.
Build to Rent Fund
The Build to Rent Fund supports the development of new purpose-built privately rented homes. It will provide ‘off the shelf’ investment opportunities and take the risk out of building homes with the intention to let. Developers will repay or pass on the loan when new investors are found. The fund will also be used to build innovative demonstration projects to show what a more professional, larger scale private rented market might look like.
Chancellor of the Exchequer George Osborne announced as part of the 2013 Budget that the fund will increase by £800 million to £1 billion. The extra finance will help meet demand and deliver thousands of extra private rented homes and large scale investment opportunities.
The first group of projects to be taken forward using the Build to Rent Fund were announced on 16 April 2013 and will support the delivery of up to 10,000 new homes.
Further information on the Build to Rent Fund and the bidding process can be found on the Homes and Communities Agency website.
New debt guarantees for private rented housing
The private rented sector housing debt guarantee scheme supports the building of new homes for the private rented sector across the UK, offering housing providers a government guarantee on debt they raise to invest in new privately rented homes. This will help to reduce their borrowing costs, increasing the number of homes they can afford to provide.
The debt guarantee is designed specifically to attract investment into the private rented sector from fixed-income investors who want a stable, long-term return on investment without exposure to residential property risk. The scheme rules for the private rented sector housing guarantee scheme were published on the 1st February 2013.
The government is open for direct discussions with interested parties that are eligible in line with the published scheme rules and that can raise their own debt finance. We will be looking for applications that comply with the scheme rules, can demonstrate a solid management structure, suitable asset cover, a viable exit strategy, robust rental demand, and are clear on where and how they will raise the debt. Please email firstname.lastname@example.org if you would like to discuss a specific proposal.
The government has recently issued an invitation to tender inviting applications from the market from organisations capable of sourcing funding and on-lending it to borrowers in line with the scheme rules. Further detail about this opportunity is available by registering on the procurement portal.
Private Rented Sector Taskforce
The expert Private Rented Sector Taskforce brings together developers, management bodies and institutional investors; with the objective to support expansion of the sector and facilitate the delivery of the above initiatives.
The Taskforce is headed by Andrew Stanford. Andrew has an impressive track record and strong industry reputation - with real passion and ambition for the Private Rented Sector. Andrew was MD and founder of Stanford Mallinson - property and asset management and is former Head of Cluttons Residential.
Taskforce members taking up post in April 2013 are:
- Julian D’Arcy of Kirkby Capital, a former regional chairman and proprietary partner at Knight Frank
- Joanna Embling, a property consultant and chartered surveyor, specialising in urban redevelopment and a former equity partner at Cushman Wakefield
- Tracey Hartley, a specialist asset manager for large scale residential landlord Grainger plc
- Dominic Martin, senior analyst at EC Harris and a qualified surveyor