A new £200 million fund will boost the construction of new homes specifically for private rent, Housing Minister Mark Prisk has said.
The new Build to Rent fund aims to cut the risk for developers more traditionally used to building homes for sale who are looking to branch out into building homes for private rent.
By financing the construction of rental homes until they are built, let out and managed, the fund will give developers the freedom to build homes specifically for that market with confidence.
Management companies will have the chance to invest in these new rental developments, and developers will then repay the investment from government.
Launching the new fund, the Housing Minister described it as yet another step to support housebuilding which will help boost the economy, create jobs and strengthen the housing market by providing people with a broader housing choice.
Reviving the rental market
Mr Prisk said that Build to Rent follows recommendations contained in the Montague report into rented homes earlier this year and will help address the varying level of quality across the nation’s private rented sector.
The majority of private rental landlords are small-scale, individual investors. This fund will redress the balance, by stimulating the market in private rented homes for large-scale housing organisations that will in turn help set a new benchmark for landlords across the country.
To kickstart this new, larger scale market for privately rented homes, the minister said that Build to Rent will fund ‘demonstration’ projects to show how it might work.
An expert taskforce will also work to boost investor awareness of the fund and offer practical support to those interested in this new 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.”
Mayor of London Boris Johnson said: “The private rented sector now houses a quarter of Londoners and has the potential to support the delivery of a huge number of new homes in the future. I welcome this funding and I will continue to make the case that investment in London’s housing infrastructure is one of the best ways to deliver much needed construction jobs and economic growth now, while at the same time laying the foundations for our economic growth for years to come.“
The Greater London Authority will lead on assessing the expressions of interest for sites in London. Shortlisting decisions will be made by DCLG, the Homes and Communities Agency and the Greater London Authority. The Homes and Communities Agency will undertake due diligence, contracting and monitoring.
The British Property Federation said the announcement reflects a long-term campaign it had spearheaded to encourage pension fund and other institutional investment in new-build market rented housing. It also marks a further step in implementation of the Montague Review of Housing Investment, conducted by Sir Adrian Montague during the summer of 2012.
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.”